For loans closed after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of the purchase price � but not at the point the borrower achieves 22 percent equity. (This law does not include certain higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for your mortgage loan that closed past July '99), regardless of the original purchase price, when your equity reaches twenty percent.
Do your homework
Study your statements often. Also be aware of what other homes are selling for in your neighborhood. If your loan is under five years old, chances are you haven't made much progress with the principal � you have been paying mostly interest.
You can begin the process of canceling PMI at the time you calculate that your equity has reached 20%. You will need to notify your mortgage lender that you want to cancel PMI. Then you will be required to verify that you have at least 20 percent equity. Most lenders require 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.
At Saab Mortgage, we answer questions about PMI every day. Give us a call at 703-288-0777.
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