Eliminating Private Mortgage Insurance

For loans closed after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of the purchase amount � but not when the loan reaches 22 percent equity. (Certain "higher risk" morgages are not included.) But if your equity gets to 20% (no matter what the original price was), you have the right to cancel PMI (for a mortgage loan that past July 1999).

Verify the numbers

Keep a running total of your principal payments. Also stay aware of what other homes are being sold for in your neighborhood. If your loan is fewer than five years old, chances are you haven't greatly reduced principal � it's been mostly interest.

The Proof is in the Appraisal

When you think you've achieved at least 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. Call the lending institution to ask for cancellation of PMI. Your lender will ask for documentation that your equity is high enough. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and your lender will probably require one before they'll cancel PMI.

At 1st Credential Mortgage Inc, we answer questions about PMI every day. Call us: (281) 778-0805.