1. Private mortgage insurance (PMI) is typically required on a conventional loan when the down payment is:
Answer & explanation
Answer: C. PMI protects the lender and is generally required when the borrower puts down less than 20% (LTV over 80%).
finance
private mortgage insurance
Private mortgage insurance (PMI) protects a lender against loss if a borrower defaults on a conventional loan. It is usually required when the down payment is less than 20 percent, meaning a loan-to-value ratio above 80 percent. Under federal law, borrowers can request cancellation at 80 percent LTV based on original value, and it generally terminates automatically at 78 percent if payments are current.
- Exam tip
- PMI is for conventional loans; FHA loans use a mortgage insurance premium (MIP). Remember the 80% request and 78% automatic termination thresholds.
- Example
- A buyer puts 10% down on a $300,000 home with a conventional loan of $270,000 (90% LTV), so the lender requires PMI.
Related terms & state variants
Sources
Source verification pending. Confirm current requirements with your state regulator.
Last verified: 2026-10-23