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FAQs >> Private Mortgage Insurance
| What is Private Mortgage Insurance (PMI)? |
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If you have less than a 20% down payment/equity (a loan –to-value ratio greater than 80%), SFN requires Private Mortgage Insurance (PMI) that is paid by the borrower. Private Mortgage Insurance protects the lender in the event of default.
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| What is loan-to-value (LTV) ratio? |
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A loan-to-value ratio is the current principal balance divided by either the original property value (the original appraised value or sales price, whichever is less), or based on a new appraisal.
For example, if the current principal loan balance is $135,000, the appraised value is $175,000, and the sales price was $182,000, then the current LTV ratio is equal to:
Current Principal Balance /
Original Property Value
$135,000 / $175,000 = 77.1%
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| How does LTV based on original value differ from LTV based on a new appraisal? |
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LTV ratio based on the original property value takes into consideration your current principal balance compared to the original property value. For example, if your principal balance is currently $80,000 and the original property value was $100,000, then your current LTV ratio based on the original property value is:
Current Principal Balance /Original Property Value -
$80,000 / $1000000 = 80.0%
LTV ratio based on a new appraisal takes into consideration increases in property value that may have been realized since the loan was originated. For example, if your principal balance is currently $80,000 and the home you originally bought for $100,000 has increased in value to $122,000, then your current LTV ratio based on the property's new appraised value is:
Current Principal Balance /New Appraised Value -
$80,000 / $122,000 = 65.5%
To determine the current property value, an SFN approved appraiser will perform a new appraisal obtained at the expense of the borrower.
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| How do I request cancellation of PMI? |
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For us to consider cancellation of Private Mortgage Insurance (PMI), you will need to submit your written request, including your phone number and e-mail address, to:
Attn: PMI Administration:
State Financial Network, Inc.
1974 Sproul Road Suite 302
Broomall, PA 19008
Once your request is received, we will review your account and inform you of the requirements.
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| Will SFN automatically terminate my PMI at a certain point? |
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For conventional loans (single-family, single-unit, owner-occupied dwellings closed on or after July 29, 1999), SFN will automatically terminate PMI when the loan balance reaches 78% of the original property value (based on the loan's original amortization), or at the midpoint of the loan's amortization schedule, if the loan is current.
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