Make Private Mortgage Insurance a Thing of the Past

For loans made since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets under 78 percent of your purchase amount � but not at the point the borrower achieves 22 percent equity. (Certain "higher risk" morgages are excluded.) However, you can actually cancel PMI yourself (for loans made after July 1999) once your equity reaches 20 percent, no matter the original price of purchase.

Keep a record of payments

Familiarize yourself with your monthly statements to keep your eye on principal payments. You'll want to be aware of the the purchase prices of the houses that are selling in your neighborhood. You've been paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't gone down much.

The Proof is in the Appraisal

You can start the process of canceling PMI at the time you you think that your equity has risen to 20%. Call your lending institution to request cancellation of your PMI. Lenders require paperwork verifying your eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be 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. Give us a call: (281) 778-0805.