PMI And Home Appraisal Value

by Kazim
(New York, NY USA)

Ask Kate About PMI And Home Appraisal Value: Hello Kate, Do I still need to pay PMI? I'm buying a house for $270,000 with 5 percent down. But the house appraised for $325,000.
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Kazim continues... We had a lender required appraisal on this house. Our closing is scheduled for next week. Thanks, Kazim

Kate Answers: PMI And Home Appraisal Value

***zz-portrait-left.shtml*** Dear Kazim,

You are wise to ask about purchase price versus home appraisal value as it relates to private mortgage insurance.

For home purchases, the need for private mortgage insurance (PMI) is calculated on the loan to value ratio (LTV). The LTV is based on whichever is less, the sales price or appraised value of the house.

PMI And Home Appraisal Value - Down Payment

For example, since you are buying a house that costs $270,000, a 5 percent downpayment would be $13,500, a 95 percent LTV. Any less than a 20 percent downpayment, 80 percent LTV, and you will be required to purchase PMI.

Please note these calculations are based on the purchase price, not appraised value. The appraised value is not taken into consideration since the purchase price is lower.

What Is PMI? How To Cancel PMI?

Below, you'll find my guide to private mortgage insurance What Is PMI addressing private mortgage insurance for both home buying and refinancing.

For example, one of the articles explains the three methods for getting rid of PMI - How Do I Cancel PMI. You'll also like my more in-depth information found at How Lenders Calculate PMI.

Best Wishes,

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Denied PMI For Appraised Value
by: Anonymous

Buying a new home for 485K in Florida with 14 percent down, my credit score is 750 and I have no debts.

The underwriter approved the loan but now the PMI company is stopping the deal. The appraised value is $525K so you would think this is great!

Can the PMI company deny insurance because the appraisal is too high? I don't get it?

Why is this happening to me?

Note from Kate: Strange! I've never heard of PMI being denied solely due to higher appraised value.

To get into the nitty-gritty of an underwriter's loan denial, go to How To Cure Mortgage Approval Hiccups.

Let me know if you have other questions after you read this. Good luck, Kate

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You can also ask Kate about your mortgage at Ask Kate About Buying a House.

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