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jasper8703 · Joined: 13 May 2007 Posts: 1 1.27 Dollars($)

What is the minimum equity interest an owner must have to cancel PMI and what is the citation in the Texas regulations for this?

kenstampe · Posted: Sun May 13, 2007 6:38 pm Post subject:

The removal of private mortgage insurance on conventional loans is determined by federal law and so state law doesn't apply. There is no state specific legislation regarding the removal of private mortgage insurance.

The law states that once the loan has reached 78% of the original value at time of loan closing, private mortgage insurance must be automatically removed by the lender. The key thing to know is that the automatic removal is a percentage of the ORIGINAL value and not any increase due to appreciation or improvements on the home.

You can request removal of the PMI by the lender, if you feel that the home is NOW worth enough value that your loan balance is at or below 80% of your home's CURRENT value. In doing so, do NOT get an appraisal done ahead of time. Instead, call the lender and request permission to remove PMI. They will let you know if you are eligible and will probably have an appraisal company they specifically require.

Removing the PMI before your loan's balance is at or below 78% of the original value is at the lender's discression but typically you need to meet the following requirements:

1) 2 years history of making mortgage payments with no late payments
2) have made a principal reduction (extra payments) or can prove that market values have increased the property's value enough.

Still, be prepared for the lender to deny your request if they feel you are still a risk for default or if the new appriasal doesn't justify a high enough value for the home.

Caron

Ken,

You've suggested not to do an appraisal prior to requesting the lender to cancel the PMI. But does that affect in any way? or do you mean that the borrower would again have to do an appraisal, this time by the lender's appointed appraiser. And that would be going for the same thing twice and paying extra charges too.

Guest

But Ken, I've heard of something just opposite to what you've said. There are states such as California, Hawaii, Maryland, Minnesota, Missouri, New York and Texas which have their own regulations in PMI.

kenstampe · Posted: Mon May 14, 2007 6:28 am Post subject:

Caron,

If the homeowner pays for a real estate appraisal, they are hiring the appraiser to represent them in the analysis. The lender is going to require an appraisal that is representing the lender. Also, most lenders have an approved appraiser list. My point was that if the homeonwer does an appraisal on their own, they will probably have to pay for another one.

kenstampe · Posted: Mon May 14, 2007 9:13 am Post subject:

Alex,

Please cite your source on that.

In 1999, the Homeownership Protection Act went into effect which provides protection for consumers and provisions for the automatic removal of PMI by lenders. I'm not aware of any Texas legislation that amends or changes the Homeownership Protection Act.

Hey, I learn something new everyday so here's your chance to teach me today. Smile

mikeshapiro · Posted: Mon May 14, 2007 2:56 pm Post subject:

Yes I believe Ken is right. The investor also sets their own requirements as I understand it beyond state law. The two year requirement is pretty much standard to remove PMI. If you have more than 20% equity, rates are lower and you have more than a year to go before you can remove PMI it might be a good time to do a refi w/out cash back to get a lower rate and remove PMI. I did just that and am saving a little over $200 a month on the same mortgage amount.

I agree NOT to have an appraisal done yourself, but what you can do is contact a local appraiser and ask them to help you on a consulting basis to see if your home looks like it would qualify. They will likely charge a small fee that they will credit you if you have the lender order the appraisal with them.

Guest

Ok Ok, my mistake. I must have missed out the date there. Here's where I got it from "http://money.cnn.com/1999/08/13/home_auto/q_pmi/"

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Minimum Equity required to cancel PMI