Finance
What is 'private mortgage insurance' (PMI) and when is it required on Idaho home loans?
AInsurance that pays off the mortgage if the borrower dies
BInsurance protecting the lender when the loan-to-value ratio exceeds 80% on conventional loans✓ Correct
CRequired on all Idaho home loans
DInsurance required only on FHA loans
Explanation
PMI protects the lender (not the borrower) against loss if the borrower defaults when LTV exceeds 80%. Under the Homeowners Protection Act, PMI must automatically cancel when the loan balance reaches 78% of the original purchase price on conventional loans.
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Key Terms to Know
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.
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.
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
State-Specific Concepts
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