If your down payment on a home is less than 20 percent of the appraised value or sale price, your lender will require you to get mortgage insurance. A mortgage insurance policy protects the lender in case of default on the payments. As a borrower, you pay the premiums, and the lender is the beneficiary.There are two types of mortgage insurers: government and private. The main government mortgage insurer is the Federal Housing Administration. Several corporations underwrite private mortgage insurance, often called PMI.A homeowner can save hundreds of dollars per month simply be eliminating PMI from their loan payments. You may be able to cancel private mortgage insurance based on certain criteria, such as an increase in property value, like what is currently taking place in San Diego, Riverside, Stockton and Sacramento, or by paying down your loan balance to a certain amount.Removing PMI On Your Own
Most of our clients choose to remove their PMI through the refinance process as having significant equity in one's home also opens the door to more competitive loan products. When done in combination the decrease in monthly payment can be significant. However, you can begin the process of PMI cancellation as soon as you determine your equity has risen to 22%. You will need to call your mortgage lender to alert them that you want to cancel PMI. Next, you will be asked to verify that you have at least 20 percent equity through an appraisal. You can get proof of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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