Question
nnnnPrivate mortgage insurance is required for residential mortgage loans if the loan-to-value ratio is in excess of:
nnnnSelections
nnnnA. 60%
nnnnB. 70%
nnnnC. 80%
nnnnD. 90%
nnnnnnnnnnnn
Answer: C
nnnnnnnn
5 Keys Summary
nnnn• Private mortgage insurance (PMI) is typically required for residential mortgage loans when the loan-to-value (LTV) ratio exceeds 80%.
nnnn• This insurance requirement applies when the borrower pays a down payment that is less than 20% of the property’s value.
nnnn• The primary purpose of PMI is to safeguard the lending institution (conventional lenders) against financial loss should the borrower default on the mortgage loan.
nnnn• Mortgage insurance enables residential borrowers to obtain loans with higher LTV ratios and smaller down payments, making loans with ratios in excess of 80% require coverage.
nnnn• Loans secured by 1 to 4 family dwellings that have loan-to-value ratios above 80 percent must carry private mortgage insurance coverage.
nnnnnnnn