When is Private Mortgage Insurance (PMI) typically required?

When is Private Mortgage Insurance (PMI) typically required?

• A. When the Borrower Has Perfect Credit
• B. For All Loans Regardless of LTV
• C. When the Loan-to-Value Ratio Exceeds 80%
• D. Only for Adjustable-Rate Mortgages

Answer: (C)

PMI is tied to how much of the home's value you’re financing. Lenders typically require Private Mortgage Insurance when the loan-to-value ratio is above 80%, meaning you’re putting down less than 20% and have less than 20% equity in the property. If you make a down payment of 20% or more, the LTV is 80% or less and PMI is usually not needed. It isn’t about credit score or only about adjustable-rate loans; many loans with small down payments require PMI, while larger down payments often eliminate it. PMI can usually be canceled once you reach about 20% equity (subject to loan program rules and appraisal).

PMI is tied to how much of the home's value you’re financing. Lenders typically require Private Mortgage Insurance when the loan-to-value ratio is above 80%, meaning you’re putting down less than 20% and have less than 20% equity in the property. If you make a down payment of 20% or more, the LTV is 80% or less and PMI is usually not needed. It isn’t about credit score or only about adjustable-rate loans; many loans with small down payments require PMI, while larger down payments often eliminate it. PMI can usually be canceled once you reach about 20% equity (subject to loan program rules and appraisal).