Finance
A Maine lender requires a borrower to maintain a loan-to-value ratio no higher than 80% to avoid private mortgage insurance (PMI). On a $350,000 home, the minimum down payment would be:
A$35,000
B$52,500
C$70,000✓ Correct
D$87,500
Explanation
To maintain an LTV of 80%, the borrower needs 20% down. $350,000 × 20% = $70,000.
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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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