Real Estate Math
A Rhode Island buyer offers $350,000 with a 10% down payment. The lender requires PMI for LTV above 80%. Does this buyer need PMI?
ANo, because 10% down means LTV is under 80%
BYes, because 10% down means LTV is 90%, above 80%, triggering PMI✓ Correct
CNo, PMI is never required in Rhode Island
DYes, but only for FHA loans
Explanation
10% down on $350,000 = $35,000 down, $315,000 loan. LTV = $315,000 / $350,000 = 90%.
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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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