PMI is required on conforming loans when the loan-to-value exceeds what percentage?

PMI is required on conforming loans when the loan-to-value exceeds what percentage?

• A. Conforming loans
• B. Non-conforming loans
• C. Jumbo loans
• D. FHA loans

Answer: (A)

PMI is required on conventional conforming loans whenever the loan-to-value ratio is greater than 80%, meaning the down payment is less than 20% of the home’s value. This insurance protects the lender if the borrower defaults on a high-LTV loan. Once equity reaches about 20% (LTV 80% or less), PMI can typically be canceled with the lender’s approval and proper documentation. Note that FHA loans use Mortgage Insurance Premium (MIP) instead, with its own rules, and jumbo or non-conforming loans follow different guidelines.

PMI is required on conventional conforming loans whenever the loan-to-value ratio is greater than 80%, meaning the down payment is less than 20% of the home’s value. This insurance protects the lender if the borrower defaults on a high-LTV loan. Once equity reaches about 20% (LTV 80% or less), PMI can typically be canceled with the lender’s approval and proper documentation. Note that FHA loans use Mortgage Insurance Premium (MIP) instead, with its own rules, and jumbo or non-conforming loans follow different guidelines.