For loans made after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls lower than 78 percent of your purchase amount � but not when the borrower earns 22 percent equity. (Some "higher risk" loans are excluded.) The good news is that you can cancel your PMI yourself (for a mortgage loan that closed after July '99), no matter the original price of purchase, when the equity rises to twenty percent.
Familiarize yourself with your monthly statements to keep a running total of principal payments. Make yourself aware of the purchase prices of other homes in your neighborhood. Unfortunately, if you have a recent loan - five years or under, you probably haven't been able to pay a lot of the principal: you are paying mostly interest.
You can begin the process of PMI cancelation when you're sure your equity has risen to 20%. First you will let your lending institution know that you are requesting to cancel PMI. Lenders ask for documentation 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 verify your equity and eligibility for canceling PMI.
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