Removing the PMI from a 203k financed property

[Brian Ragsdale]

Good day--We bought our current primary resident for a base price, with an additional 203k rehab of $55k. We bought our home 4 years ago, and the 5th year anniversary is Oct 2017. According to the rules as explained to me by the loan servicer and the original mortgage holder, Prospect, one could apply to have the PMI removed once they owned the home for 5 years or when/if the property appreciated by 20% from the original purchase price.

Although, it was my understanding that PMI could be removed after the home value appreciated 20%, thus leaving us with an 80% LTV. Unfortunately, the original purchase price plus the rehab dollars are treated as one loan, and using that combined figure (sales price + rehab dollars) currently leaves us at 92%, LTV.

I remember reading somewhere that the calculation for LTV would be based on the original purchase price and not the purchase price but rehab value, but I could be mistaken. Does anyone know the FHA rule?