Finance
Private Mortgage Insurance (PMI) in Pennsylvania can be cancelled when:
AThe loan is 5 years old
BThe LTV ratio reaches 80% of the original purchase price or appraised value (whichever is lower) and the borrower requests cancellation✓ Correct
CThe borrower refinances to a different lender
DThe property value increases by 25%
Explanation
Under the Homeowners Protection Act (federal), PMI must be cancelled automatically when LTV reaches 78% based on original value and amortization schedule. Borrowers may request cancellation when LTV reaches 80% of the original value if they have a good payment history.
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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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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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