Question

When you take out a mortgage you should be sure to purchase private mortgage insurance because it will benefit you as the debtor on the mortgage

a. true
b. false

Answer 1

Private mortgage insurance (PMI) is not mandatory for all borrowers and depends on your down payment. While PMI allows for a lower down payment, it comes with additional costs. Therefore, the statement that you should always purchase PMI as a debtor is false. Correct option is b)

Step-by-step explanation:

Mortgage insurance is not mandatory for all borrowers, and whether or not you need it depends on your specific situation. Private mortgage insurance (PMI) is typically required if you make a down payment of less than 20% of the home's purchase price. It protects the lender in case you default on the loan.

As the debtor, you may benefit from PMI in that it allows you to purchase a home with a lower down payment. However, you should also consider the additional cost of PMI in your monthly mortgage payments.

In summary, the statement is false. It is not necessary to purchase private mortgage insurance when taking out a mortgage, but it may be required in certain situations.