The recent escalation of real estate costs forced many recent home buyers to pay private mortgage insurance (PMI). Some homeowners may qualify to stop making these payments. Are you needlessly paying PMI?

Overview
Homeowners that offer a small down payment (typically less than 20 percent) may be required by their lender to pay PMI. Lenders charge these fees to ensure against default on the part of the borrower.

Removal Qualifications
The 1998 Homeowners Protection Act (HPA) allows homeowners to request cancellation of PMI. The law covers loans made after July 29, 1999 and does not apply to VA and FHA government-guaranteed loans.

Under HPA, PMI fees may be waived if one of the following criteria is met, whichever is less:
• 20 percent home equity has been achieved based on the original appraisal of the home
OR
• the home loan has been paid down to 80 percent or less of the original sale price.

Steps to Remove
Loan repayment
Lenders must automatically stop PMI billing in concordance with HPA when the home loan has been paid under 80 percent, if loan payment history has remained current.

Appraisal
If a homeowner believes that area home values have increased to the degree that 20 percent equity has been reached, the homeowner should contact the mortgage company holding the home loan.

An appraisal will be required to determine home value. The lender may schedule an appraisal with a third party service or the homeowner may be tasked with this duty. Either way, the homeowner is responsible for paying the appraisal fee.

Once the appraisal report results are available, the homeowner must send a copy of the report to the lender.

Shy of the Goal
If the home value has yet to reach the 20 percent mark, homeowners can pay more money on the principle each month or make smart home improvements to raise the value of their property. Ask the appraiser or your realtor about beneficial home improvements, before swinging the hammer.

For more information about this program visit the Mortgage Insurance Companies of America http://www.privatemi.com or The U.S. Department of Housing and Urban Development http://www.hud.gov