7% interest rate?!

[Lumpy1106]

I think you're talking about two different things.

When your LTV drops to 78%, PMI must be removed automatically. So if your house is $300,000, the second the mortgage balance drops below $234,000, PMI goes away, by law. It doesn't matter whether this is through your normal payments and amortization schedule or if you come up with some extra cash to apply towards principal for what effectively amounts to an after-the-fact down payment.

That's different than an appraisal wherein you try to convince them that your $300,000 is now a $400,000 house.

It was the latter. Eye-opening fact for 1st-time buyers; it is astonishing how long it takes to get to 78% LTV if you just make payments - it would have been 13 years, 9 months in my case. The first couple of years you are paying almost entirely interest . I am in So Cal - the house value went up 50% in a couple of years. That left me with a choice; refinance with a different bank (with the cost and hassle associated with that process) or get the bank I was working with to allow me to get an appraisal to demonstrate I now had < 78% LTV remaining. An option I would not entertain is continuing to pay the PMI for an additional decade +.

So back to the OP topic; you want to continue saving and put down +20% if at all possible. Paying the PMI is of no value to you and can be a real PITA to get rid of.

 

[dvcgirl67]

It's reasonable to expect home prices to keep up with inflation in the long run.

Rates should continue to go up. Prices will come down a bit. But we still have a huge supply issue.

We do have a supply issue, and I know that a lot of lax lending issues of 07/08 are not in play this time around. But there was just a true frenzy for the last 6-12 months of this latest housing bubble, and it wouldn't surprise me to see prices drop by 30% in some of those areas. And remember, a lot of this is going to be regional and affected by how people migrated during the pandemic. A lot of people who thought Idaho looked amazing on Instagram....have suddenly decided that they prefer their old west coast city instead. Some of those areas are going to get hit hard.

And if you buy near the top of the market as we did in 2007...it's just not a great investment and may not keep pace with inflation. We've been here for 15 years and our house (at the peak of the market)....has appreciated a whopping 1.75% per year. And...that percentage will go down a bit as my house depreciates. After the big drop from 2007-09 we just stopped thinking of this home as an investment...it's where we live. We paid cash for it, and so at I guess we can think of it as parking about 16% of our overall wealth in a low paying CD.

 

[RamblingMad]

We do have a supply issue, and I know that a lot of lax lending issues of 07/08 are not in play this time around. But there was just a true frenzy for the last 6-12 months of this latest housing bubble, and it wouldn't surprise me to see prices drop by 30% in some of those areas. And remember, a lot of this is going to be regional and affected by how people migrated during the pandemic. A lot of people who thought Idaho looked amazing on Instagram....have suddenly decided that they prefer their old west coast city instead. Some of those areas are going to get hit hard.

And if you buy near the top of the market as we did in 2007...it's just not a great investment and may not keep pace with inflation. We've been here for 15 years and our house (at the peak of the market)....has appreciated a whopping 1.75% per year. And...that percentage will go down a bit as my house depreciates. After the big drop from 2007-09 we just stopped thinking of this home as an investment...it's where we live. We paid cash for it, and so at I guess we can think of it as parking about 16% of our overall wealth in a low paying CD.

Homes are not good investments unless you rent them out.

I'd be surprised if home prices drop that much.

 

[GAN]

I'm on track to be buying a home in the new year, hopefully before my lease runs out in March. The current interest rate is around 7% and rising! I hate the thought of buying a house with the plan to refinance ASAP, but I don't really know what else to do. Does anyone have any good stories about refinancing? Or can you share your experience with buying when the interest rates are so inflated? When my ex husband and I bought our house the interest rate was under 4% so I'm feeling some sticker shock!!! And I read an article recently that was predicting we might see 10% interest rates!! I really want to follow through with my plan to buy but this kind of has me scared and ready to ask my landlord for another lease.

Word is the rates could come down to around 4.5 in the 1st quarter next year. Price increases in general have definitely stabilized, so the increased rates are working. Your timing might be good….

 

[dvcgirl67]

Homes are not good investments unless you rent them out.

I'd be surprised if home prices drop that much.

But they are touted as a great investment....the "American dream"....yada yada. And I sure hope that we don't see price drops that high, especially in my town .....but in some areas of the country it won't surprise me at all.

 

[RamblingMad]

Word is the rates could come down to around 4.5 in the 1st quarter next year. Price increases in general have definitely stabilized, so the increased rates are working. Your timing might be good….

No way. The Fed is planning to bring the Fed Funds Rate up to 5%. Mortgage rates should go to 8% or higher. I doubt we'll see mortgage rates anywhere near 4ish until at least 2024.

Check this out:

https://stlouisfed.shinyapps.io/macro-snapshot/#keyIndicators

 

[Mackenzie Click-Mickelson]

It was the latter. Eye-opening fact for 1st-time buyers; it is astonishing how long it takes to get to 78% LTV if you just make payments - it would have been 13 years, 9 months in my case. The first couple of years you are paying almost entirely interest . I am in So Cal - the house value went up 50% in a couple of years. That left me with a choice; refinance with a different bank (with the cost and hassle associated with that process) or get the bank I was working with to allow me to get an appraisal to demonstrate I now had < 78% LTV remaining. An option I would not entertain is continuing to pay the PMI for an additional decade +.

So back to the OP topic; you want to continue saving and put down +20% if at all possible. Paying the PMI is of no value to you and can be a real PITA to get rid of.

Was your issue what the appraised value came back as? Did you look at the comps they said they were using? Were they close enough to what your county was using for their value?

We refinanced 2 1/2 years in to get rid of PMI (which was $160/month) but it really wasn't a hassle, I can relate to your situation although I didn't have quite the same experience you did.

 

[DCLMP]

Word is the rates could come down to around 4.5 in the 1st quarter next year. Price increases in general have definitely stabilized, so the increased rates are working. Your timing might be good….

I think the fed will pivot next year unless their plan is a severe depression, default or both. There's too much debt. The math just doesn't work. The gaslighters on here will tell me I'm nuts, but they never have an answer on how we get out of this mess.

 

[tvguy]

We refinanced 2 1/2 years in to get rid of PMI (which was $160/month) but it really wasn't a hassle, I can relate to your situation although I didn't have quite the same experience you did.

My daughter had an appraiser at her house today. She isn't refinancing, but wants to drop PMI. But her's is only $50 a month. Lender required a local appraisal that cost her $150. Appraiser took pictures of all the rooms, was there all of 7 minutes (yes, I timed it). Appraiser said her job was basically making sure the house wasn't trashed since it is clear the appreciation of the house the past three years means she has well over the 20% equity.

 

[RamblingMad]

I think the fed will pivot next year unless their plan is a severe depression, default or both. There's too much debt. The math just doesn't work. The gaslighters on here will tell me I'm nuts, but they never have an answer on how we get out of this mess.

Higher taxes fixes both the debt and reduces demand to push down inflation. But no one wants that, so we'll get more pain instead. Powell isn't backing off.

Here's his speech. He's super clear.

 

[Mackenzie Click-Mickelson]

My daughter had an appraiser at her house today. She isn't refinancing, but wants to drop PMI. But her's is only $50 a month. Lender required a local appraisal that cost her $150. Appraiser took pictures of all the rooms, was there all of 7 minutes (yes, I timed it). Appraiser said her job was basically making sure the house wasn't trashed since it is clear the appreciation of the house the past three years means she has well over the 20% equity.

So couple of things

1) Companies can elect to do waivers on appraisals. Our first refinance to get rid of PMI we did have to have an appraisal, second time we refinanced (May 2020) we were given a waiver on an appraisal needed

2) No appraiser has ever stepped foot inside our house with exception to when it was first completed which was just for the purposes of giving the details to the county, the first price on a new build for the county is the purchase price of the home.

3) The only time I have ever heard of appraiser needing to come inside the home is if you're trying to increase your home because you've done things inside like remodeled a bathroom, kitchen, etc. From what I understand your daughter did work on the inside of the house (well you said something like it needed work done inside). To just get rid of PMI unless there is some state law requiring them to come inside you usually don't have someone do that.

 

[tvguy]

So couple of things

1) Companies can elect to do waivers on appraisals. Our first refinance to get rid of PMI we did have to have an appraisal, second time we refinanced (May 2020) we were given a waiver on an appraisal needed

2) No appraiser has ever stepped foot inside our house with exception to when it was first completed which was just for the purposes of giving the details to the county, the first price on a new build for the county is the purchase price of the home.

3) The only time I have ever heard of appraiser needing to come inside the home is if you're trying to increase your home because you've done things inside like remodeled a bathroom, kitchen, etc. From what I understand your daughter did work on the inside of the house (well you said something like it needed work done inside). To just get rid of PMI unless there is some state law requiring them to come inside you usually don't have someone do that.

This is strictly to drop PMI. This is the third time in 3 years she has had an appraiser there. First when she bought it, second time she when she refinanced, today to drop PMI. Like the appraiser said, the purpose of the in person appraiser is to confirm she hasn't trashed the place. They can us comps from public record to establish value. My daughter has done very little to the house. Biggest item being replacing the HVAC. She did replace the dishwasher and have the electrical outlets upgraded to current GFI standards and add up to less than $1,000, and while the appraiser did note and photograph them, she said the HVAC was about the only thing that might impact value.

 

[Mackenzie Click-Mickelson]

This is strictly to drop PMI. This is the third time in 3 years she has had an appraiser there. First when she bought it, second time she when she refinanced, today to drop PMI. Like the appraiser said, the purpose of the in person appraiser is to confirm she hasn't trashed the place. They can us comps from public record to establish value. My daughter has done very little to the house. Biggest item being replacing the HVAC. She did replace the dishwasher and have the electrical outlets upgraded to current GFI standards and add up to less than $1,000, and while the appraiser did note and photograph them, she said the HVAC was about the only thing that might impact value.

Maybe your daughter's lender required that in order to remove PMI with them they needed to an interior inspection especially if she told them she did work on them but that was not such a condition of ours. I cannot find any reason through searching where a lender requires an interior inspection on the basis of removing PMI. I could see them saying "we've run comps, oh you disagree with the value? oh you installed new HVAC system and upgraded the electrical to safer outlets? Okay well we'd like to verify that"

TBH "make sure it isn't trashed" is a weird reasoning. I think I would be insulted if an appraiser came into my home with the assumption that the interior needed to be checked for that. Sounds iffy to me.

 

[DCLMP]

Higher taxes fixes both the debt and reduces demand to push down inflation. But no one wants that, so we'll get more pain instead. Powell isn't backing off.

Here's his speech. He's super clear.

Uh ok. LOL. You don't need to post his speeches for my benefit I've watched them all. You obviously have no idea how much debt there is. You do realize when there's a depression there's less tax revenue. People actually have to make money to pay taxes.

 

[dvcgirl67]

I think the fed will pivot next year unless their plan is a severe depression, default or both. There's too much debt. The math just doesn't work. The gaslighters on here will tell me I'm nuts, but they never have an answer on how we get out of this mess.

Well… no argument from me on this one…you’re right. I don’t know when the pause/pivot will come, but it has to happen. The alternative is…beyond awful. It’s kicking a ginormous can down the road, but that’s what they’ll do

 

[barkley]

We did really well on the sale of our first two houses thanks to the crazy run-up in real estate from 2004-2007. We sold two homes during that period and netted over 500K in profit. However, the house we live in now....we purchased in 2007, and it took over 11 years for us to get back to what we paid for it. The OP would be saving herself a lot of pain by waiting in my opinion. Anyone who put less than 20% down on homes in the last couple of years may find themselves underwater in short order.

i would reccommend waiting as well. we sold our home in '06 for 3x what we paid for it in '99, waited to buy again until mid '07 and were able to take advantage of the much more buyer oriented market (what we paid in an overpriced rental market was minor compared to the savings in home purchase price) there will always be people who want or need to sell their homes-buying during a feeding frenzy should be avoided.

It's reasonable to expect home prices to keep up with inflation in the long run.

how long is 'the long run'? 5,10,15, 20 years or more? the home we sold in '06 only just this year, in this crazy frenzied seller's market managed to get back up estimated value wise to the sales price we sold it for-but oops, i just looked online and it's estimated value has dropped over 1% in the last 30 days alone so it's skating being underwater again. did not keep up with inflation in the short term let alone over the last 16 plus years. same with the bulk of housing in that region that had buyers back then.

So couple of things

1) Companies can elect to do waivers on appraisals. Our first refinance to get rid of PMI we did have to have an appraisal, second time we refinanced (May 2020) we were given a waiver on an appraisal needed

2) No appraiser has ever stepped foot inside our house with exception to when it was first completed which was just for the purposes of giving the details to the county, the first price on a new build for the county is the purchase price of the home.

3) The only time I have ever heard of appraiser needing to come inside the home is if you're trying to increase your home because you've done things inside like remodeled a bathroom, kitchen, etc. From what I understand your daughter did work on the inside of the house (well you said something like it needed work done inside). To just get rid of PMI unless there is some state law requiring them to come inside you usually don't have someone do that.

before we paid off our mortgage we re-fi'd our current home a couple of times to take advantage of tremendous drops in interest rates. both times the appraiser did a full walk through w/ photos. from what i know it's the norm in our region b/c most homes are either custom or spec built so they can't default to the generalities of what a comparably sized home in the same neighborhood has sold for.

 

[tvguy]

Maybe your daughter's lender required that in order to remove PMI with them they needed to an interior inspection especially if she told them she did work on them but that was not such a condition of ours. I cannot find any reason through searching where a lender requires an interior inspection on the basis of removing PMI. I could see them saying "we've run comps, oh you disagree with the value? oh you installed new HVAC system and upgraded the electrical to safer outlets? Okay well we'd like to verify that"

TBH "make sure it isn't trashed" is a weird reasoning. I think I would be insulted if an appraiser came into my home with the assumption that the interior needed to be checked for that. Sounds iffy to me.

I can't defend or explain the process. It is what the lender required. It was exactly what the Independent Broker told my daughter to expect when she requested the PMI to be removed. And the Real Estate agent who came and did the inspection is the one who described it as a way lenders protect themselves against people who have trashed their houses.
And apparently what most lenders do in California.

See third to last paragraph:
Most lenders require a real estate appraisal by a state certified appraiser as the primary proof required to eliminate unnecessary PMI insurance.



https://calhomeappraisals.com/pmi-r...re a real,unneeded and unwanted PMI insurance.

 

[Mackenzie Click-Mickelson]

before we paid off our mortgage we re-fi'd our current home a couple of times to take advantage of tremendous drops in interest rates. both times the appraiser did a full walk through w/ photos. from what i know it's the norm in our region b/c most homes are either custom or spec built so they can't default to the generalities of what a comparably sized home in the same neighborhood has sold for.

Every home is custom in my neighborhood and many are spec homes...like the 3 being built on my street right now..we literally have model rows over time depending on which section of the neighborhood had the most lots open at a given time. So far it's moved 3 times since we've been here.

Comps on our home are within a mile of my house (not always in my neighborhood but close by if they aren't) including what the appraiser did when we first did our refi part of the reason I asked that to the PP to get an idea if they disagreed with the appraiser. That does happen sometimes you feel they are looking at homes too far away from you or something that is not right around the size/layout, etc.

 

[Mackenzie Click-Mickelson]

It is what the lender required.

That's what I thought. Regardless that wasn't even a point of my inquiry to the other poster. It was just asking if they disagreed with the appraisal and if that was why some issues cropped up for them.

That doesn't even make sense to say an interior inspection is to ensure you aren't trashing your home. What world do you live in that that makes sense? We're not talking about a foreclosure here where the bank may have more grounds to ensure the property they will soon be actually owning isn't being wrecked during the process. PMI isn't about the cleanliness of your home, it's because you put down less money down at the beginning.

You do realize there are two types of appraisals right? An appraisal where someone comes by and takes a look at the exterior of your home (drive-by appraisal often done when nothing inside has been done that could bump up the value), does comps of it, etc and then one that goes a step further and goes inside. We were never talking about does a lender require an inspection, we were talking about going inside your home.

My state law requires every house to be appraised at market value every January 1st. My state law also requires that a photo be taken of your home every 6 years (usually because of the timing it can be a tad shorter or a tad longer than that by the time they get to your house). On the first reappraisal to get rid of PMI an exterior check and a comp was run, no interior was ever requested or even mentioned. The second refinanced we were not required to get an appraisal and were given a waiver on that (high confidence that the home appreciated far away from what the loan balance would be).

 

[DCLMP]

Well… no argument from me on this one…you’re right. I don’t know when the pause/pivot will come, but it has to happen. The alternative is…beyond awful. It’s kicking a ginormous can down the road, but that’s what they’ll do

Finally we agree on something. When they pivot are we going to have hyperinflation and currency collapse? Do we default and reset the currency? The inflation we are seeing now is a combination of increased money supply and supply shortages. You can't compare it to other recessions because the current debt is astronomical. I know I can be hyperbolic, but how else do you describe our debt?

I research this to death and I haven't found one person that thinks there's an easy way out of this. It's a choice between inflation or implosion. In the long term will recover, but the short term it's going to be rough. There's also a war in Europe. There's China and Russia...there's just a lot right now and none of it's good.