Goal: avoid overpaying for a house.
- $200k house
- 800+ credit score
- Conventional 30 year loan at market rate
- Conventional loan requires 5% down minimum
- I can comfortably afford 20% down
- Loan freely allows for principal pre-payment
- Loan recasting costs money; I am not interested in this
When buying a house you pay the bank to send an appraiser to ensure there is worthy collateral for the loan.
If you are offering 20% ($40k) down then does the bank simply approve the loan if the house is appraised at $160k?
I ask because it would seem wiser to only shoot for 5% ($10k) down so that the bank is looking for enough value to justify the price. In turn this would help you achieve a fair price.
To avoid PMI I would just make a lump payment for the other $30k once the sale is final.