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Are standard down payments required when purchasing with over 20% equity

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Are standard down payments required when purchasing with over 20% equity given purchase price is less appraised value (over 20%)? First time buyer as well.

 

Reading Nerd wallet many Loans require 3% downpayment except Navy Federal.

 

Thanks for input

 

Rd

 

 

 

 

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Are you saying if sold at list price, the house has 20% equity? The amount of equity does not dictate the down payment amount. The loan program you have determines how much much required.

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On a purchase I believe the underwriters will look at appraised value or purchase price, and then use whichever is lower to calculate LTV.

 

Here is one article that supports this impression.

 

https://themortgagereports.com/13598/loan-to-value-for-mortgages-explained-in-plain-english

 

Wait for a mortgage pro to weigh in before taking this as universally true.

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The only mortgages that include equity in the property on a purchase that I am aware of are hard money loans typically used by real estate investors. 

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I'm not sure how out it works if you get a loan for purchase or if it would even be worth it.  I believe if you pay cash you can do a cash out refi after 6 - 12 months and get 80% of LTV based on appraisal.  Especially if you make some improvements.

 

I find it very hard to believe your buying something listed for 80% of market value in this market. Everything around here is overpriced and the only seemingly good deals need a lot of work that seems to get underestimated by newbies.

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On 8/29/2018 at 7:03 PM, rdz said:

 

Are standard down payments required when purchasing with over 20% equity given purchase price is less appraised value (over 20%)? First time buyer as well.

 

Reading Nerd wallet many Loans require 3% downpayment except Navy Federal.

 

Thanks for input

 

Rd

 

 

 

 

Sent from my iPhone using Tapatalk

 

It depends on the situation.

If you are buying the home from a relative then the "equity" can be gifted to you & it will treated just like a cash down payment of 20%. This would allow you to go with a conventional loan with no money down & no PMI.

If you are simply buying a property under value, then the underwriting guidelines require lenders to use the lower of the 2 between the sales price & the appraised value.

 

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From my experience if you find a home worth a market value of 200k, but you are fortunate enough to be able to get it for 100k, traditional lenders will still want you to put down a percentage of the "sales" price. Search for a lender that has an underwriter which has dealt with the "gifting" of equity before. A loan agent will tell you anything but the underwriter is what counts.

 

 

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