Make Private Mortgage Insurance a Thing of the Past

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Beginning in 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans closed after July of '99) goes below seventy-eight percent of the purchase price, but not at the point the loan's equity gets to twenty-two percent or more. (Some "higher risk" mortgages are excluded.) However, you have the right to cancel PMI yourself (for mortgages made after July 1999) once your equity gets to 20 percent, without consideration of the original price of purchase.

Keep a running total of payments

Familiarize yourself with your loan statements to keep your eye on principal payments. Make yourself aware of the purchase prices of other houses in your immediate area. Unfortunately, if you have a new loan - five years or under, you likely haven't had a chance to pay a lot of the principal: you are paying mostly interest.

Proof of Equity

You can start the process of PMI cancellation as soon as you're sure your equity reaches 20%. First you will let your lender know that you are asking to cancel your PMI. Then you will be required to submit documentation that you have at least 20 percent equity. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for canceling PMI.

PFS Funding can answer questions about PMI and many others. Call us: (925) 560-7644.

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