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 gets under 78 percent of the purchase price � but not at the point the loan reaches 22 percent equity. (Certain "higher risk" loans are excluded.) But you are able to cancel PMI yourself (for mortgage loans made after July 1999) at the point your equity rises to 20 percent, no matter the original purchase price.

Do your homework

Review your statements often. Make yourself aware of the prices of other homes in your immediate area. Unfortunately, if yours is a new mortgage - five years or fewer, you likely haven't begun to pay very much of the principal: you have been paying mostly interest.

Proof of Equity

At the point you find you've reached 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. Call the lending institution to request cancellation of your Private Mortgage Insurance. Your lender will request proof that your equity is at 20 percent or above. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount � and most lenders require one before they agree to cancel PMI.

At Lighthouse Mortgage Company, we answer questions about PMI every day. Give us a call at (916) 434-8915.

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