Real Estate Math
A Virginia property costs $475,000. A buyer makes a 15% down payment. If PMI is required at 0.6% of the loan, what is the annual PMI cost?
A$2,423✓ Correct
B$2,414
C$2,411
D$2,432
Explanation
Down payment = $475,000 × 15% = $71,250. Loan = $475,000 – $71,250 = $403,750.
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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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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.
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