...appraisal value, or purchase price? We are trying to avoid paying the PMI on a house we are going to buy. What do the bank base the 20% on the appraisal value, or purchase price?

It's based on the purchase price, since the mortgage insurance is based entirely up the LOAN, and you only loan on what you borrow to PURCHASE.

For this case you would only have PMI if you put less than 20% + closing costs down.

If the lender is giving you a low enough rate, then you should be in a really good position. If not, feel free to email me.

purchase price.

they don't lend on the appraised value, unless it is less than the purchase price, then they will lend their 80% on the lesser amount.

www.mortgagecalc.com - to calculate your payments.
MBA-Boston Univ.
CPA-retired
GOD bless us one and all, always.