For loans closed since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of the purchase amount � but not when the loan reaches 22 percent equity. (Certain "higher risk" mortgage loans are not included.) The good news is that you can request cancelation of your PMI yourself (for your mortgage closing past July '99), no matter the original purchase price, when the equity reaches twenty percent.
Familiarize yourself with your loan statements to keep a running total of principal payments. You'll want to stay aware of the the purchase prices of the homes that sell around you. Unfortunately, if yours is a recent mortgage loan - five years or under, you probably haven't had a chance to pay a lot of the principal: you have been paying mostly interest.
When you determine you have achieved at least 20 percent equity in your home, you can start the process of getting PMI out of your budget. First you will tell your lender that you are asking to cancel PMI. Then you will be asked to submit documentation that you have at least 20 percent equity. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.
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