By Alvin "CHIP" Wagner, III, IFA, SCRP

Alvin "Chip" Wagner, III, IFA, is Vice President of A.L. Wagner Appraisal Group, Real Estate Appraisers ∓ Consultants, Naperville, IL.

PMI, the acronym for private mortgage insurance, allows an individual(s) to purchase their home with less than a 20% down payment. The question the homeowner must ask themselves is: "Is it time to stop paying monthly into my escrow account for PMI and start putting that money into my pocket???"

The most important question is to ask is if the current loan balance is less than 80% of the home's current market value. Since it is difficult to be objective about the value of one's own home, the owner should get an unbiased second opinion. A Realtor who is familiar with the area may be able to help with a valuation through a comparative market analysis. A preliminary consultation with a trained appraiser familiar with your area could also help the homeowner.

There has been a lot of discussion in the press recently regarding consumers that are unnecessarily paying private mortgage insurance. The possible ways one may have achieved enough equity in their home to qualify for a PMI free mortgage are:

1. Owner has paid enough to reduce the principal mortgage balance below the 80% Loan-To-Value (LTV)
2. The home has appreciated sufficiently enough so that the mortgage balance is 80% or less LTV.
3. Owner has upgraded the home so that the new appraised value will equal at least 20% of the current market value. Upgrades include making significant improvements such as adding decks, patios, finishing basements, updating kitchen and baths, replacing roofs or furnaces, or making other additions to the home or real property. Improvements that are typically not considered upgrades include window treatments or personalized decorating.

If the homeowner believes that the above criteria has been met, the next step is to contact the current lender requesting information on the requirements to remove the PMI coverage. The most common conditions are, but not limited to, the following:

1. A minimum period of time has elapsed since the loan closed. This may vary from as few as 6 months to more than 2 years, depending on the investor.
2. The loan is current with no history of late payments.
3. A new independent appraisal performed by a lender approved appraiser. The homeowner will be required to pay the appraisal fee that is quoted on an individual basis by the appraisal professional.
4. The loan balance must be below 65% to 80% of the current property value.

Woodworth Appraisal has experience in appraisals specializing in PMI coverage removal in the greater Thurston County area of Washington State and we would love to assist you.

Please contact us at 360-491-7566 --- fax: 360-491-7602 if we can assist you. You may also contact us via e-mail at: ">woodworthappraisal@comcast.net.