Real Estate Math
A buyer in Alaska purchases a $420,000 home, making a 15% down payment. How much private mortgage insurance is required annually if the PMI rate is 0.75% of the loan amount?
A$2,677.50✓ Correct
B$3,150.00
C$3,206.25
D$4,725.00
Explanation
Down payment = $420,000 × 15% = $63,000. Loan = $420,000 − $63,000 = $357,000.
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Key Terms to Know
Private Mortgage Insurance (PMI)
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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