While lenders have been required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) when the balance gets below 78% of the purchase price, they do not have to cancel automatically if the loan's equity is above 22%. (There are exceptions -like certain "high risk' loans.) However, if your equity gets to 20% (regardless of the original purchase price), you have the legal right to cancel PMI (for a loan that after July 1999).
Familiarize yourself with your loan statements to keep track of principal payments. Make yourself aware of the purchase prices of other houses in your immediate area. Unfortunately, if yours is a recent loan - five years or under, you probably haven't been able to pay very much of the principal: you are paying mostly interest.
You can begin the process of PMI cancelation as soon as you calculate that your equity reaches 20%. First you will let your lender know that you are requesting to cancel your PMI. Lenders request paperwork verifying your eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and most lenders will require one before they'll cancel PMI.
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