Finance
Under the Homeowners Protection Act, a Virginia lender MUST automatically cancel PMI when the loan balance reaches what percentage of original value?
A85%
B80%
C78%✓ Correct
D75%
Explanation
The Homeowners Protection Act requires automatic PMI cancellation when the mortgage balance reaches 78% of the original appraised value (or purchase price, whichever is less), assuming no delinquency.
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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.
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