A borrower is buying a home for $110,000 and has $15,000 to put down on a conventional mortgage. The home appraises for $125,000. Will she need to pay PMI?
A. No - with the higher value the LTV will be 76% and PMI will no longer be required
B. Yes - even though the value came in higher, the lender must utilize the lower purchase price when calculating the initial LTV
C. It depends on whether or not the automated underwriting system requires PMI
D. Yes - the purchase price will have to be raised to meet the value
Answer:B
A borrower is buying a home for $110,000 and has $15,000 to put down on a conventional mortgage. The home appraises for $125,000. Will she need to pay PMI?
A. No - with the higher value the LTV will be 76% and PMI will no longer be required B. Yes - even though the value came in higher, the lender must utilize the lower purchase price when calculating the initial LTV C. It depends on whether or not the automated underwriting system requires PMI D. Yes - the purchase price will have to be raised to meet the value