Goodbye, PMI!

Since 1999, lending institutions have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans closed past July of that year) goes below seventy-eight percent of the price of purchase, but not at the time the borrower's equity gets to twenty-two percent or higher. (Certain "higher risk" loan programs are excluded.) However, if your equity reaches 20% (regardless of the original purchase price), you have the right to cancel PMI (for a mortgage closed after July 1999).

Verify the numbers

Keep a running total of money going toward the principal. You'll want to be aware of the the purchase prices of the houses that are selling around you. If your mortgage is fewer than five years old, chances are you haven't greatly reduced principal � you have paid mostly interest.

Proof of Equity

Once your equity has risen to the required twenty percent, you are close to getting rid of your PMI payments, once and for all. You will first let your lender know that you are requesting to cancel your PMI. The lending institution will require documentation that your equity is at 20 percent or above. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for PMI cancellation.

First State Bank can answer questions about PMI and many others. Call us at 4025970500.

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