Finance
Private Mortgage Insurance (PMI) is typically required when the down payment is less than:
A5%
B10%
C20%✓ Correct
D25%
Explanation
Lenders typically require PMI when the buyer's down payment is less than 20% of the purchase price, protecting the lender against 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.
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.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
Math Concepts
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