Goodbye, PMI!

For loans closed 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 at the point the borrower earns 22 percent equity. (Certain "higher risk" mortgage loans are not included.) However, if your equity reaches 20% (regardless of the original purchase price), you have the right to cancel PMI (for a loan closed past July 1999).

Do your homework

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

Proof of Equity

You can start the process of canceling PMI when you calculate that your equity has reached 20%. First you will tell your lender that you are requesting to cancel your PMI. Lenders require documentation verifying your eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and almost all lenders will require one before they'll cancel PMI.

Firelight Mortgage Consultants can help find out if you can eliminate your PMI. Call us at (303) 228-2254.

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