Goodbye, PMI!

For loans made after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of your purchase amount � but not when the borrower achieves 22 percent equity. (Some "higher risk" mortgage loans are not included.) The good news is that you can request cancelation of your PMI yourself (for your loan that closed after July '99), regardless of the original price of purchase, once the equity rises to twenty percent.

Keep track of payments

Keep a running total of each principal payment. You'll want to keep track of the the purchase amounts of the homes that sell in your neighborhood. Unfortunately, if you have a new mortgage - five years or under, you likely haven't been able to pay a lot of the principal: you are paying mostly interest.

Proof of Equity

Once you think you have reached 20 percent equity, you can begin the process of freeing yourself from PMI payments. You will first tell your lender that you are asking to cancel PMI. Lenders ask for paperwork verifying your eligibility at this point. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.

At Tier One Mortgage, LLC, we answer questions about PMI every day. Call us: (585) 282-0960.