For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls under 78 percent of the purchase price � but not at the point the borrower achieves 22 percent equity. (There are some loans that are not included -like some loans considered 'high risk'.) However, you are able to cancel PMI yourself (for loans made past July 1999) at the point your equity reaches 20 percent, without consideration of the original price of purchase.
Do your homework
Familiarize yourself with your monthly statements to keep track of principal payments. Find out the selling prices of other houses in your neighborhood. Unfortunately, if yours is a recent mortgage loan - five years or fewer, you likely haven't been able to pay a lot of the principal: you have been paying mostly interest.
The Proof is in the Appraisal
You can begin the process of canceling your PMI as soon as you're sure your equity has reached 20%. Call the mortgage lender to request cancellation of your Private Mortgage Insurance. Then you will be asked to verify that you have at least 20 percent equity. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.
American Mortgage Advisers, Inc can help find out if you can eliminate your PMI. Call us at 214-865-7442.
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