On conventional loans, PMI is required when LTVR exceeds what percentage?

• A. 75%
• B. 80%
• C. 90%
• D. More than 80%

Answer: (D)

PMI is used to protect the lender when the borrower has less than 20% equity. On conventional loans, the need for PMI comes from the loan-to-value ratio: if the loan amount is more than 80% of the property’s value, the LTV exceeds 80% and PMI is typically required. When you provide 20% down, the LTV is 80% or less, and PMI is usually not required. For example, a $300,000 home with a $270,000 loan has an LTV of 90% and would usually need PMI; a $240,000 loan on the same home is 80% LTV, and PMI is generally not required. The key point is that PMI is triggered when LTV exceeds 80%.