Finance
In Minnesota, the Homeowners Protection Act (PMI Cancellation Act) requires lenders to:
AProvide PMI for all loans over $500,000
BAutomatically cancel PMI when the loan balance reaches 78% of the original property value✓ Correct
CAllow PMI cancellation only after 10 years
DProvide PMI at no cost to the borrower
Explanation
The Homeowners Protection Act requires automatic cancellation of PMI when the loan balance reaches 78% of the original property value (based on scheduled amortization) and the borrower is current on payments. Borrowers may also request cancellation when the loan reaches 80% LTV based on original value.
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Key Terms to Know
Amortization
The 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.
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.
Math Concepts
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