Goodbye, PMI!

For loans closed since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls under 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (This legal requirment does not cover a number of higher risk mortgages.) But you are able to cancel PMI yourself (for mortgage loans closed past July 1999) when your equity rises to 20 percent, regardless of the original price of purchase.

Do your homework

Review your statements often. Also stay aware of the price that other homes are purchased for in your neighborhood. Unfortunately, if yours is a recent mortgage loan - five years or fewer, you likely haven't started to pay a lot of the principal: you have been paying mostly interest.

Verify Equity Amount

Once you find you've reached 20 percent equity in your home, you can begin the process of freeing yourself from PMI payments. You will need to notify your mortgage lender that you wish to cancel PMI. Lenders require proof of eligibility at this point. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.

Statewide Funding can answer questions about PMI and many others. Call us at (415) 456-7802.

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