What does 'PMI cancellation' require under the Homeowners Protection Act?
Why Lenders must cancel PMI automatically when the loan balance reaches 78% of the original purchase price (for loans meeting certain criteria) Is Correct
Answer B: Lenders must cancel PMI automatically when the loan balance reaches 78% of the original purchase price (for loans meeting certain criteria)
Exam Tip: Finance
Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.
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Key Terms to Know
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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