Question

You have found a home that you are interested in purchasing. Instead of a conventional loan, you agree to pay the premium for the private mortgage insurance (PMI), which finances 95% of the loan. The amount of the home is listed at $125,000. From the given information, determine the amount needed for the down payment to qualify for the PMI loan.

a.
$6,250
c.
$625
b.
$118,750
d.
$62,500

Answer 1

a.

$6,250

Explanation:

Finances 95% of the loan.

So you have to pay 100% - 95% = 5% of the loan.

The amount of the home is listed at $125,000.

You have to pay 5% of this. So

0.05*125000 = $6,250

The answer is given by option A.