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maksim [4K]
3 years ago
13

A conventional mortgage loan is one that is not insured or guaranteed by an agency of the U.S. government. The lender, however,

can still pursue a private mortgage insurance (PMI) policy to provide a guarantee for the fulfillment of the borrower's obligations. Typically PMI is required for all loans that have a loan to value (LTV) ratio greater than: a)40%. b)60%. c)20%. d)80%.
Social Studies
1 answer:
AleksAgata [21]3 years ago
8 0

<u>Answer</u>:    d)80%.

<em>PMI is required for all loans that have an LTV ratio of 80%.</em>

<u>Explanation:</u>

Institutions and lenders calculate the LTV ratio and assess the risk prior to the approval of a mortgage loan. <em>LTV ratio is calculated by dividing the loan amount by the property value.</em> Higher LTV ratios indicate that there is higher risk for the lenders.  

Thus a Private Mortgage Insurance has to be purchased to offset the risk of the lender. <em>The loan amount being close to the appraised value of the property means that the LTV ration is high.</em> Thus if the loan goes default the lender’s will have to face difficulty.  

If foreclosure happens the lender wouldn’t be able to make enough Profit by selling out the property.<em> This is why a PMI is demanded in such cases.  </em>

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Option A

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4 0
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pochemuha
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