Finance
Private Mortgage Insurance (PMI) is typically required on conventional loans when the LTV exceeds:
A75%
B80%✓ Correct
C90%
D95%
Explanation
PMI is required on conventional loans when the LTV exceeds 80% (down payment less than 20%). The Homeowners Protection Act requires automatic cancellation of PMI when LTV reaches 78% based on the original amortization schedule.
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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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
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.
Math Concepts
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