Goodbye, PMI!

For loans closed after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78 percent of your purchase amount � but not at the point the borrower achieves 22 percent equity. (The law does not cover some higher risk mortgages.) However, if your equity reaches 20% (regardless of the original price of purchase), you are able to cancel PMI (for a mortgage loan closed past July 1999).

Verify the numbers

Keep track of each principal payment. You'll want to be aware of the the purchase amounts of the houses that sell in your neighborhood. If your loan is under five years old, probably you haven't made much progress with the principal � you have paid mostly interest.

The Proof is in the Appraisal

When you find you've reached 20 percent equity in your home, you can start the process of getting PMI out of your budget. You will need to notify your mortgage lender that you wish to cancel PMI payments. Lending institutions ask for documentation verifying your eligibility at this point. Most 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.

The Mortgage Exchange Service LLC can answer questions about PMI and many others. Give us a call: 703.255-5810.

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