Make Private Mortgage Insurance a Thing of the Past

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While lending institutions have been required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the point the loan balance gets under 78% of the price of purchase, they do not have to cancel automatically if the equity is more than 22%. (There are some loans that are not covered by this law -like certain "high risk' loans.) However, you can actually cancel PMI yourself (for mortgage loans made past July 1999) at the point your equity rises to 20 percent, no matter the original purchase price.

Do your homework

Keep a running total of your principal payments. Also stay aware of the price that other homes are selling for in your neighborhood. Unfortunately, if yours is a recent loan - five years or under, you probably haven't had a chance to pay a lot of the principal: you are paying mostly interest.

Proof of Equity

You can begin the process of PMI cancellation as soon as you're sure your equity reaches 20%. You will first tell your lender that you are requesting to cancel your PMI. Then you will be required to verify that you are eligible to cancel. You can acquire documentation of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.

American Pacific Mortgage can help find out if you can eliminate your PMI. Give us a call at (209) 357-7000.

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