Finance
A Vermont borrower with a conventional loan who has less than 20% equity typically must pay:
AA second mortgage to a state agency
BPrivate mortgage insurance (PMI)✓ Correct
CA higher property transfer tax rate
DAn additional Vermont mortgage recording fee
Explanation
Conventional loans with less than 20% down payment (or less than 20% equity) typically require private mortgage insurance (PMI), which protects the lender in case of borrower default. PMI can be cancelled once equity reaches 20%.
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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.
Transfer TaxA tax imposed by state or local governments when real property ownership is transferred, typically based on the sale price.
AgencyA legal relationship in which a licensee (agent) acts on behalf of a principal (buyer or seller) in a real estate transaction.
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
State-Specific Concepts
Transfer TaxRecording Requirements
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