Eliminating Private Mortgage Insurance

For loans made after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of your purchase price � but not at the point the borrower earns 22 percent equity. (A number of "higher risk" loan programs are excluded.) But you are able to cancel PMI yourself (for loans closed past July 1999) at the point your equity reaches 20 percent, regardless of the original price of purchase.

Keep track of payments

Keep a running total of money going toward the principal. Also be aware of what other homes are selling for in your neighborhood. You are paying mostly interest if you closed your loan fewer than 5 years ago, so your principal probably hasn't lowered much.

Proof of Equity

When you think you have reached 20 percent equity, you can start the process of getting PMI out of your budget. You will need to notify your mortgage lender that you want to cancel PMI. Lenders ask for proof of eligibility at this point. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.

Lighthouse Mortgage Company can answer questions about PMI and many others. Give us a call at 9164348915.

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