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Can lenders charge for an additional appraisal when trying to get rid of PMI?

I was told that I would have to pay an additional $500.00 for a new appraisal when trying to cancel my PMI after reaching 78% LTV but I made a large down payment and don't want to fund a whole new appraisal so soon after purchasing the home. by LRockstein from Lakewood, Colorado. Jan 23rd 2013 Reply


Bert Carpenter (BertCarpenter)
#37 ranked lender in Arizona - 1,823 contributions

For non-FHA loans, mortgage insurance (PMI) can be cancelled when your mortgage balance reaches 80% of the original value used to make the loan. To do so, the borrower must make the request to the loan servicer. Assuming you are not relying on any property appreciation and are just relying on the current principal balance being at 80% or less of the original value used to make the loan, then no appraisal should be required. However, the Act does specify that cancellation is based on the point in time where the regular amortization brings the balance to 80% of the original value used to make the loan, irrespective of the actual balance of the mortgage. What this means is that if you meet the equity requirement because of an acceleration of payments (or lump sum payment to principal), the lender can require you to provide an appraisal to establish that the current value of the home vs. the loan balance provides the required 20% equity. You can find a great information piece that documents the extent of the Homeowners Protection Act of 1998 at http://www.mgic.com/pdfs/71-41599hopa.pdf. ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ Licensed in California and Arizona ~ www.LoansA2z.com 888-889-9950

Jan 23rd 2013
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Steven Ceceri (CreativeFinancingOptionsGroup)
#36 ranked lender in Massachusetts - 723 contributions

As most others noted, check your original loan documents, but assuming this is a Fannie or Freddie backed loan, the burden of today's market value will be on you. If your loan is FHA Insured, the documents you signed at closing should disclosure the cancellation policy for the mortgage insurance. From your notes, it seems you recently purchased this property, so depending on your market, the valuation may not be high enough yet. Also, you can consider options if you think your rate could improve where you could considering refinancing into a different loan program and calculate your new loan to be at or less than 80% loan to value, thus eliminating MI all together. I'd be happy as anyone here to talk to you directly so the entire situation can be discussed in greater detail. A phone conversation will usually produce more results than our replies to the limited information supplied!

Jan 23rd 2013
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William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,726 contributions

The lender can and will charge for the appraisal to determine your value.. Since your petitioning them to have it removed, it's up to you to prove you have sufficient equity, and you get to pay any costs associated with it.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Jan 23rd 2013
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Michelle Curtis Loan Originator NMLS 401173 (EmbassyFundingLLC)
#77 ranked lender in Florida - 2,240 contributions

Unfortunately it's up to you to prove your home is at the 78% LTV so yes they can charge you.

Jan 23rd 2013
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Steve Azarch (sazarch)
#18 ranked lender in Tennessee - 93 contributions

Yes, the lender can charge for the additional appraisal because they need to make sure that you are at least at or below the 78% ltv.

Jan 23rd 2013
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David Widlund (david_283_200)
#44 ranked lender in Colorado - 7 contributions

You really need to go back to your closing paperwork, find your PMI document(s) and see what the guidelines are. Typically, a mortgage insurance policy has a minimum amount of payments, regardless of how much your home value has increased or your loan amount has decreased. That minimum number of payments is typically 60. If you're able to cut off 40 or 50 payments by purchasing a new appraisal, the amount of your savings is so much higher than the cost of the appraisal. If you're fortunate enough to be able to shorten your mortgage insurance payment period, I would jump at paying $500 for an appraisal. But again, be sure you know the rules as lined out in your closing package. Be sure you can actually do what they're telling you.

Jan 23rd 2013
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Ken Burrows (mortgagesforamerica)
#19 ranked lender in Nevada - 572 contributions

Yes I agree with David. Check your old paperwork. A lot of loans are 78% of the loan balance, not the loan to value. In this case you would not need an appraisal or need to prove anything. Simply they are required by law to drop the PMI after 78% of the loan balance. But again it should be spelled out in your old paperwork.

Jan 23rd 2013
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Michelle Curtis Loan Originator NMLS 401173 (EmbassyFundingLLC)
#77 ranked lender in Florida - 2,240 contributions

To expand on Davids point , if you haven't paid the MI for the rquired 5 years on an FHA loan or typically a year on a conventional loan it won't drop. If you have an FHA loan then you may want to look into refinancing into a conventional loan. But be sure and check with your lender and review your loan closing documents before ordering an appraisal

Jan 23rd 2013
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Peter Botros (PeterBotros)
#70 ranked lender in New York - 895 contributions

Yes they can.

Jan 23rd 2013
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Jacob Haddan (JacobColeHaddan)
#69 ranked lender in Colorado - 36 contributions

LRockstein,How much did you put down? I may be able to use the old appraisal and refinance you based on that at one of my investors. Feel free to contact me to discuss the details. Jacob Mobile 720.210.7898 Call or text. Apply online with me at https://secure.web-loans.com/security-logon.aspx?timeout=1PS. 3 months is usually the limit on appraisals but I've been able to do a recert and get that extended if caught before the 91st day. JHJacob Cole Haddan - Mortgage Broker/Banker MAC5 Mortgage Inc. |www.mac5mortgage.com | 225 Union Blvd. Ste. 350 | Lakewood Co. 80228 | Direct/Cell: 720.210.7898|Home/Magic Jack 305-848-8255 | Fax: 720.407.6343 |Toll Free: 866.606.MAC5| Fax 866.426.2203 Regulated by the Division of Real Estate CLICK HERE for my online application NMLS#232061 Colorado LMB# 100007576

Jan 23rd 2013
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Jacob Haddan (JacobColeHaddan)
#69 ranked lender in Colorado - 36 contributions

LRockstein,How much did you put down? I may be able to use the old appraisal and refinance you based on that at one of my investors. Feel free to contact me to discuss the details. ***********************************Jacob Mobile 720.210.7898 Call or text. *********************************************Apply online with me at https://secure.web-loans.com/security-logon.aspx?timeout=1************************************************PS. 3 months is usually the limit on appraisals but I've been able to do a recert and get that extended if caught before the 91st day. JH*************************************************Jacob Cole Haddan - Mortgage Broker/Banker MAC5 Mortgage Inc. |www.mac5mortgage.com | 225 Union Blvd. Ste. 350 | Lakewood Co. 80228 | Direct/Cell: 720.210.7898|Home/Magic Jack 305-848-8255 | Fax: 720.407.6343 |Toll Free: 866.606.MAC5| Fax 866.426.2203 Regulated by the Division of Real Estate CLICK HERE for my online application NMLS#232061 Colorado LMB# 100007576

Jan 23rd 2013
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Joe Shamie (Joe Shamie)
#5 ranked lender in New Jersey - 1,412 contributions

Most leanders will require an appraisal to prove the value.

Jan 23rd 2013
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 3,960 contributions

Generally speaking, there are two options to remove PMI. One is the automatic removal by the lender once the Loan-to-Value goes BELOW 78% of the original appraisal. Regardless of when this is, on Conforming Fannie Mae and Freddie Mac loans, you must pay PMI for at least two-years. On an FHA loan, you must pay at least 5-years. Once you have gone beyond the year limit, it is up to you to prove to the lender the value is below 80%. This is done by YOU paying for an appraisal from an acceptable to the lender appraisal company.

Jan 24th 2013
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