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I am about to close a mortgage loan for a HUD property which I had originally opted for a USDA Rural @ 3.25% for a sale price if $135,500 for 30 years. I just got the bank appraisal which states its value at $157,000.

The current Conventional loan rate is at 3.875% and they ask for 5% down payment.

If I put in a down payment of $15,000 for the conventional loan, would I be able to automatically get rid of the Mortgage Insurance or do I still need to put in 20%+ down payment?

Should I just stick to my 3.25% USDA Rural loan then?

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    Why don't you ask the lender? They would provide you with the most accurate information regarding their requirements and terms and conditions. – Victor Jun 29 '15 at 22:15
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In general, PMI is required if you put less than 20% down on the sale price of the home, not the appraised value. If you go with conventional, in general after one year you can appraise the home again and if the mortgage amount is less than 80% of the new appraised value you can request the PMI to be removed.

If I were you, I would be going for the USDA program.

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