Finance
Private mortgage insurance (PMI) is typically required when a buyer's down payment is:
ALess than 5% of the purchase price
BLess than 10% of the purchase price
CLess than 20% of the purchase price✓ Correct
DLess than 25% of the purchase price
Explanation
Lenders typically require PMI when the borrower's down payment is less than 20% of the purchase price (LTV greater than 80%). PMI protects the lender in case of 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.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
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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