For loans made since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets under 78 percent of the purchase amount - but not when the borrower earns 22 percent equity. (This law does not include some higher risk mortgages.) But you are able to cancel PMI yourself (for mortgages made after July 1999) once your equity gets to 20 percent, no matter the original purchase price.
Familiarize yourself with your mortgage 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 in your neighborhood. If your mortgage is under five years old, chances are you haven't made much progress with the principal - you have paid mostly interest.
You can begin the process of canceling your PMI as soon as you're sure your equity reaches 20%. First you will notify your lender that you are requesting to cancel your PMI. Lending institutions request documentation verifying your eligibility at this point. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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