Private Mortgage Insurance (PMI) is typically required on a conventional loan when the loan-to-value (LTV) ratio exceeds:
Correct Answer
B) 80%
PMI is required by conventional lenders when the borrower's down payment is less than 20%, resulting in an LTV ratio above 80%. PMI protects the lender, not the borrower, in case of default. Once the borrower's equity reaches 20% (LTV drops to 80% or below), PMI can typically be cancelled under the Homeowners Protection Act.
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