Finance
Private Mortgage Insurance (PMI) is typically required when the loan-to-value ratio (LTV) exceeds:
A70%
B75%
C80%✓ Correct
D90%
Explanation
Lenders typically require Private Mortgage Insurance (PMI) when a borrower's down payment is less than 20%, resulting in an LTV above 80%. PMI protects the lender in case of default.
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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.
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.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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.
Math Concepts
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