Eliminating Private Mortgage Insurance

For loans made since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes under 78 percent of the purchase price � but not when the borrower earns 22 percent equity. (Some "higher risk" morgages are not included.) But you can actually cancel PMI yourself (for loans made past July 1999) at the point your equity reaches 20 percent, no matter the original price of purchase.

Keep a running total of payments

Familiarize yourself with your monthly statements to keep a running total of principal payments. Also be aware of the price that other homes are purchased for in your neighborhood. Unfortunately, if yours is a recent mortgage - five years or under, you likely haven't had a chance to pay very much of the principal: you are paying mostly interest.

Verify Eligibility

You can begin the process of PMI cancelation as soon as you're sure your equity reaches 20%. Contact the lending institution to request cancellation of PMI. Lenders request proof of eligibility at this point. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.

Lighthouse Mortgage Company can answer questions about PMI and many others. Give us a call at (916) 434-8915.

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