Finance
A Kentucky conventional loan with a loan-to-value ratio above 80% will typically require:
AAn FHA mortgage insurance premium
BPrivate mortgage insurance (PMI)✓ Correct
CA second mortgage as collateral
DVA loan guarantee
Explanation
Conventional loans with LTV above 80% (down payment less than 20%) require private mortgage insurance (PMI) to protect the lender against default. PMI can be cancelled when equity reaches 20% under the Homeowners Protection Act.
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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.
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