Goodbye, PMI!

For loans made since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls under 78 percent of the purchase amount � but not when the borrower earns 22 percent equity. (The legal obligation does not cover a number of higher risk mortgages.) However, you have the right to cancel PMI yourself (for mortgages closed past July 1999) when your equity reaches 20 percent, regardless of the original purchase price.

Do your homework

Analyze your statements often. Find out the prices of other houses in your immediate area. Unfortunately, if you have a new mortgage - five years or fewer, you likely haven't had a chance to pay a lot of the principal: you are paying mostly interest.

The Proof is in the Appraisal

When you think you've reached 20 percent equity in your home, you can begin the process of freeing yourself from PMI payments. You will first notify your lender that you are asking to cancel PMI. Lenders require proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and almost all lending institutions will require one before they'll cancel PMI.

At Stepping Stone Mortgage, we answer questions about PMI every day. Give us a call at (541) 683-3300.

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