Goodbye, PMI!

For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets lower than 78 percent of the purchase price � but not at the point the borrower achieves 22 percent equity. (Some "higher risk" mortgage loans are not included.) But if your equity rises to 20% (regardless of the original purchase price), you have the right to cancel PMI (for a loan closed after July 1999).

Keep track of payments

Keep a running total of money going toward the principal. You'll want to stay aware of the the purchase prices of the houses that sell around you. You've been paying mostly interest if you closed your loan fewer than 5 years ago, so your principal most likely hasn't been reduced by much.

Verify Eligibility

Once you find you've reached 20 percent equity in your home, you can start the process of freeing yourself from PMI payments. First you will let your lender know that you are asking to cancel your PMI. Lending institutions request proof of eligibility at this point. Usually 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.

At The Reen Team at American Pacific Mortgage, we answer questions about PMI every day. Give us a call at (408) 626-1879.

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