Private Mortgage Insurance (PMI) is typically required when the loan-to-value (LTV) ratio exceeds which threshold?
Correct Answer
B) 80%
Private Mortgage Insurance (PMI) is typically required by conventional lenders when the borrower's loan-to-value (LTV) ratio exceeds 80%, meaning the borrower has less than 20% equity or down payment. PMI protects the lender in the event of borrower default. Under the federal Homeowners Protection Act, borrowers have the right to request PMI cancellation once their LTV reaches 80%, and lenders must automatically cancel it at 78% LTV based on the original amortization schedule.
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