True or False: Private mortgage insurance is required for down payments less than 20% of the home price.

True or False: Private mortgage insurance is required for down payments less than 20% of the home price.

• A. True
• B. False
• C. Only for certain mortgage types
• D. Never required

Answer: (A)

Private mortgage insurance (PMI) is indeed required for down payments that are less than 20% of the home's purchase price. The rationale behind this requirement is to protect lenders in case the borrower defaults on the loan. When a borrower puts down less than 20%, it indicates a higher risk for the lender, and PMI serves as a safeguard against potential losses. This requirement applies primarily to conventional loans, which are not backed by government agencies like FHA or VA loans. However, the need for PMI may vary depending on the specific loan program and lender policies, but generally, a down payment of less than 20% will trigger the requirement for PMI. Other options suggest varying conditions under which PMI might be required or not required, which do not align with the standard practice in mortgage lending. Therefore, the statement that PMI is required for down payments less than 20% is true.

Private mortgage insurance (PMI) is indeed required for down payments that are less than 20% of the home's purchase price. The rationale behind this requirement is to protect lenders in case the borrower defaults on the loan. When a borrower puts down less than 20%, it indicates a higher risk for the lender, and PMI serves as a safeguard against potential losses.

This requirement applies primarily to conventional loans, which are not backed by government agencies like FHA or VA loans. However, the need for PMI may vary depending on the specific loan program and lender policies, but generally, a down payment of less than 20% will trigger the requirement for PMI.

Other options suggest varying conditions under which PMI might be required or not required, which do not align with the standard practice in mortgage lending. Therefore, the statement that PMI is required for down payments less than 20% is true.