A buyer puts 20% down on a $500,000 conventional purchase and is quoted a monthly mortgage insurance premium of $145.
Correct Answer
D) No mortgage insurance is required at 80% loan-to-value or below
A conventional loan at 80% loan-to-value or below carries no mortgage insurance, so a 20% down payment on $500,000 leaves a $400,000 loan that needs none and the $145 quote should not be there. Other choices: there is no seasoning period of 24 months that creates or removes the requirement; the loan amount is not what triggers insurance, the loan-to-value is; and the 78% termination point matters only on a loan that had insurance to begin with. Source: Conventional mortgage insurance at 80% LTV
Why This Is the Correct Answer
A conventional loan at 80% loan-to-value or below carries no mortgage insurance, so a 20% down payment on $500,000 leaves a $400,000 loan that needs none and the $145 quote should not be there. Other choices: there is no seasoning period of 24 months that creates or removes the requirement; the loan amount is not what triggers insurance, the loan-to-value is; and the 78% termination point matters only on a loan that had insurance to begin with. Source: Conventional mortgage insurance at 80% LTV
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