PMI is typically required for conventional loans with down payment below what percentage?

PMI is typically required for conventional loans with down payment below what percentage?

• A. Yes
• B. No
• C. Often
• D. Never

Answer: (A)

PMI is private mortgage insurance that protects the lender when the borrower makes a down payment of less than 20% on a conventional loan. When the down payment is under 20%, the loan-to-value ratio is higher, meaning the lender faces more risk if the borrower defaults. PMI helps offset that risk, which is why it’s typically required in these cases. The cost is added to monthly payments (or may be paid upfront), and you can usually remove PMI once you have at least 20% equity in the home (often when the loan balance reaches 80% of the original value, with automatic cancellation around 78% if payments are current).

PMI is private mortgage insurance that protects the lender when the borrower makes a down payment of less than 20% on a conventional loan. When the down payment is under 20%, the loan-to-value ratio is higher, meaning the lender faces more risk if the borrower defaults. PMI helps offset that risk, which is why it’s typically required in these cases. The cost is added to monthly payments (or may be paid upfront), and you can usually remove PMI once you have at least 20% equity in the home (often when the loan balance reaches 80% of the original value, with automatic cancellation around 78% if payments are current).