Make Private Mortgage Insurance a Thing of the Past

For loans closed 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 amount � but not when the borrower achieves 22 percent equity. (This legal requirment does not apply to some higher risk mortgages.) But you are able to cancel PMI yourself (for mortgages closed after July 1999) at the point your equity gets to 20 percent, no matter the original price of purchase.

Keep a record of payments

Keep a running total of each principal payment. Find out the selling prices of other houses in your immediate area. Unfortunately, if yours is a new loan - five years or under, you likely haven't had a chance to pay much of the principal: you are paying mostly interest.

The Proof is in the Appraisal

When you find you have reached 20 percent equity in your home, you can start the process of getting PMI out of your budget. Call your lending institution to request cancellation of your Private Mortgage Insurance. Next, you will be required to verify that you have at least 20 percent equity. You can acquire documentation of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.

Front Range Lending can answer questions about PMI and many others. Call us at 7202537070.