A buyer takes a conventional mortgage on a home with an original value of $500,000. Under the Homeowners Protection Act, assuming the buyer is current and other conditions are met, at what principal balance can the buyer first request PMI cancellation?
Correct Answer
A) $400,000
The buyer can first request cancellation at a principal balance of $400,000. Formula: PMI request threshold = Original value × 80% = $500,000 × 0.80 = $400,000. CFPB explains that a borrower may request PMI cancellation when the principal balance is scheduled to reach 80% of the home's original value, assuming the borrower meets the required conditions.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
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