For loans closed after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets lower than 78 percent of your purchase amount � but not at the point the borrower achieves 22 percent equity. (A number of "higher risk" loans are not included.) However, you are able to cancel PMI yourself (for loans closed after July 1999) when your equity rises to 20 percent, regardless of the original price of purchase.
Keep a running total of your principal payments. You'll want to stay aware of the the purchase prices of the homes that sell around you. You are paying mostly interest if your closing was fewer than 5 years ago, so your principal probably hasn't gone down much.
When you determine you've reached 20 percent equity, you can start the process of getting PMI out of your budget. Contact the lending institution to request cancellation of PMI. Lenders ask for paperwork verifying your eligibility at this point. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.
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