A borrower wants to finance PMI premiums into their loan amount rather than pay monthly. Which statement about this arrangement is correct?
Correct Answer
A) Financed PMI can never be canceled during the loan term
When PMI premiums are financed into the loan amount (lender-paid PMI or LPMI), the coverage typically cannot be canceled during the loan term because the premium has been paid upfront. This differs from borrower-paid monthly PMI, which can be canceled when LTV requirements are met.
Why This Is the Correct Answer
When PMI premiums are financed into the loan amount (lender-paid PMI or LPMI), the coverage typically cannot be canceled during the loan term because the premium has been paid upfront. This differs from borrower-paid monthly PMI, which can be canceled when LTV requirements are met.
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