Goodbye, PMI!

For loans made since 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 the purchase amount � but not at the point the borrower earns 22 percent equity. (There are some loans that are excluded -like some "high risk' loans.) However, you can actually cancel PMI yourself (for mortgages made after July 1999) once your equity reaches 20 percent, without consideration of the original price of purchase.

Verify the numbers

Familiarize yourself with your monthly statements to keep your eye on principal payments. You'll want to stay aware of the the purchase amounts of the houses that are selling in your neighborhood. Unfortunately, if you have a new mortgage - five years or fewer, you probably haven't started to pay a lot of the principal: you have been paying mostly interest.

The Proof is in the Appraisal

As soon as your equity has reached the desired twenty percent, you are not far away from canceling your PMI payments, once and for all. First you will tell your lender that you are asking to cancel PMI. Lending institutions request proof of eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount � and almost all lending institutions require one before they agree to cancel PMI.

Stepping Stone Mortgage can answer questions about PMI and many others. Give us a call at (541) 683-3300.

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