Make Private Mortgage Insurance a Thing of the Past

For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (There are some exceptions -like some loans considered 'high risk'.) But you have the right to cancel PMI yourself (for mortgages closed after July 1999) once your equity rises to 20 percent, no matter the original purchase price.

Verify the numbers

Keep a running total of your principal payments. Find out the selling prices of other houses in your immediate area. Unfortunately, if you have a new mortgage loan - five years or under, you likely haven't had a chance to pay much of the principal: you have been paying mostly interest.

The Proof is in the Appraisal

You can begin the process of PMI cancelation at the time you calculate that your equity has reached 20%. Call the lender to request cancellation of your PMI. Then you will be required to verify that you have at least 20 percent equity. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and most lenders request one before they agree to cancel.

At Statewide Funding, we answer questions about PMI every day. Call us: (415) 456-7802.

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