Question

Ari obtains a mortgage loan from Bayside Bank so that he can buy a house. The house costs $200,000. Ari makes a down payment of $20,000. Based on the amount of the price paid up front, Bayside will likely require Ari to __________.

Answer 1

Bayside Bank will likely require Ari to purchase mortgage insurance because his down payment of $20,000 is less than the standard 20% of the home's purchase price.

Step-by-step explanation:

Ari obtains a mortgage loan from Bayside Bank to buy a house costing $200,000 and makes a down payment of $20,000. Given that the down payment is 10% of the purchase price, which is less than the typical 20% that lenders prefer, Bayside will likely require Ari to purchase mortgage insurance. Mortgage insurance protects the lender in case Ari defaults on the loan, as a smaller down payment indicates a higher risk to the lender. This insurance is an additional cost, increasing the overall amount that Ari will pay over the life of the mortgage.