Beginning in 1999, lenders have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans made past July of '99) goes beneath seventy-eight percent of the purchase price, but not at the time the loan's equity reaches twenty-two percent or more. (Some "higher risk" loan programs are not included.) The good news is that you can cancel your PMI yourself (for your loan closing past July '99), regardless of the original purchase price, after your equity reaches twenty percent.
Analyze your statements often. You'll want to stay aware of the prices of the homes that sell around you. If your mortgage is fewer than five years old, chances are you haven't made much progress with the principal � it's been mostly interest.
When you think you have reached 20 percent equity in your home, you can begin the process of getting PMI out of your budget. Call the lending institution to ask for cancellation of PMI. The lending institution will request proof that your equity is at 20 percent or above. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and your lender will probably require one before they'll cancel PMI.
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