Out Of Appraisal Money
Amanda is concerned about if she pays for an appraisal and it reveals that they don't have enough equity to drop the private mortgage insurance.
QUESTION: Amanda just reached 20% equity on their mortgage and wants to drop the private mortgage insurance. She needs to get an appraisal done for $400, but if the house appraises for less than she thinks, she will be out that money and not get to drop the PMI. What does Dave say?
ANSWER: If it’s a Fannie Mae, I would check with the mortgage company on that. If you get the debt ratio down to a certain level, about 78% or so of the original purchase price, they may be required to drop the private mortgage insurance. They certainly have to drop it if you get an appraisal that proves it’s at 80%.
There’s a likelihood your house has gone down in value if you bought it a few years ago. Ask a real estate agent to pull some comparable sales in the area, or comps, for you. The way a residential real estate appraiser does an appraisal is they find three homes in the neighborhood that have sold recently and are similar in size and amenities, and adjust for the differences. They have an adjusted price based on the average of those three comps. They could probably pull that up in a few minutes and tell you what your house would roughly appraise for, and it could save you a few hundred bucks.