We’re using single payment PMI to save deals with low appraisals time and again.
Single payment or lump sum PMI is not only extremely cheap – but it can also be financed or added on to the mortgage!
This saves deals because it only increases the mortgage by a mere pittance (word of the day), so psychologically, borrowers have no issue with making up for an appraisal shortfall.
For example, we have a $670,000 transaction right now with 20% down. The appraisal, however, is expected to come in at $635,000, forcing the borrowers to cover the $35,000 appraisal shortfall.
The borrowers will then NOT have enough funds for a 20% down payment. They intended to put $134,000 against a $670,000 purchase price.
They are now going to have to use $35,000 of those funds to cover their shortfall, leaving only $99,000 for a down payment against their $635,000 appraisal.
This is an 84.4% loan-to-value – putting them solidly into PMI territory.
We simply added the $2,400 lump sum PMI to their loan amount – and their payment went up by a whopping… $16.
Our borrowers of course jumped for this deal, and the agents on both sides are delighted as well.
Listing Agents Accepting Offers with No Appraisal Contingencies
An exceptionally prominent listing agent just told us that she is prioritizing offers with no appraisal contingencies over all others in her market – given how hot it is and given how high the risk of a low appraisal is right now in multiple offer situations.
Explaining the lump sum PMI technique described above is a great way to make buyers comfortable waiving their appraisal contingencies.
