PMI question (loan, loan, property, bank)

[camrynh]

My husband and I closed on our house about 5 months ago. At the time, we paid 10% down and are paying PMI. We now have the funds available to pay another 10%. Our mortgage is with Bank of America. If we pay the other 10% of our mortgage, to equal 20%, will we be able to get our PMI removed?

[Daddys///M3]

You should be able to. For all intents and purposes, within the first 12 months of your purchase the purchase price is the home value. I would contact BofA, let them know that you intend to pay down the principal an additional 10% and you wish to have the PMI removed. They will advise on the steps needed.

[Debsi]

If they sold your loan to Freddie and Fannie you won't be able to remove PMI until you have at minimum 2 years of seasoning on the loan.

[NJ987654]

PMI is on a loan for 24 months. At the end of the 24th payment, if you have not been late, you can request it be canceled provided you can verify you have 20% equity. Call them first.

[Trogge]

Originally Posted by Debsi

If they sold your loan to Freddie and Fannie you won't be able to remove PMI until you have at minimum 2 years of seasoning on the loan.

I beleive the 2 yr. seasoning requirement is if you you are trying to prove 20%equity through value (i.e. appreciation). I

f you pay the loan down to 78% of the original purchase price (i.e. put 10% down originally and now pay down another 10-12%) then the PMI will cease.

[Debsi]

Originally Posted by Trogge

I beleive the 2 yr. seasoning requirement is if you you are trying to prove 20%equity through value (i.e. appreciation). I

f you pay the loan down to 78% of the original purchase price (i.e. put 10% down originally and now pay down another 10-12%) then the PMI will cease.

That 78% rule is the date the loan is first scheduled (i.e. amortization schedule as of closing) to reach 78%, not the date it actually does.

[Trogge]

Originally Posted by Debsi

That 78% rule is the date the loan is first scheduled (i.e. amortization schedule as of closing) to reach 78%, not the date it actually does.

Again I am not 100% sure (yet), but...for mortgages established on or after July 29, 1999, the Homeowners Protection Act requires lenders to automatically cancel PMI when the loan balance is paid down to 78% of the original purchase price. And, if the borrower requests it, the lender must cancel PMI when the loan balance is paid down to 80% of the original value. For PMI to be canceled, the borrower’s mortgage payments must be current.

It doesn't matter if it takes 2 months or 2 years, if you pay the pricinpal balance down to 80% you can get rid of the PMI.

[f_m]

Originally Posted by Trogge

It doesn't matter if it takes 2 months or 2 years, if you pay the pricinpal balance down to 80% you can get rid of the PMI.

Isn't it 80% of the appraised value? If the value has gone down or up then circumstances could change (of course if they are within 5 months it may not be an issue, unless the area is a known declining value area).

[Debsi]

I went and read the rules again.

You're right, Trogge, that it can be the day that the balance actually reaches 80% of the original property value. I was mixing this situation up with the rules borrower-initiated PMI removal based on current value.

I am guessing, however, that most banks in this economy would make you buy an appraisal to confirm the same value, no matter how recently the loan closed, as the rule says that the servicer must warrant that "current property value is at least equal to the original property value" and if the servicer is "not comfortable with making this warranty" they may require a Broker's price opinion or appraisal to confirm the value.

[camrynh]

Thanks for all the input. I have to get off my duff and call BoA. I'll let you know what they say!