Goodbye, PMI!

For loans made after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets under 78 percent of your purchase amount � but not at the point the loan reaches 22 percent equity. (This law does not include a number of higher risk mortgages.) However, you are able to cancel PMI yourself (for mortgage loans closed after July 1999) once your equity rises to 20 percent, no matter the original price of purchase.

Do your homework

Familiarize yourself with your mortgage statements to keep your eye on principal payments. You'll want to keep track of the the purchase prices of the homes that sell in your neighborhood. Unfortunately, if you have a new mortgage loan - five years or under, you probably haven't had a chance to pay a lot of the principal: you have been paying mostly interest.

The Proof is in the Appraisal

At the point your equity has reached the magic number of twenty percent, you are not far away from stopping your PMI payments, for the life of your loan. Call the mortgage lender to ask for cancellation of your PMI. The lending institution will ask for proof that your equity is high enough. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and most lenders require one before they'll cancel PMI.

At Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234, we answer questions about PMI every day. Give us a call at 214-663-5355.