Question

Morty has just purchased a home at a cost of $235,000. Morty pays $35,000 down on the home. Will he be required to purchase primary mortgage insurance (PMI)?

a) Yes, because the down payment is less than 20%
b) No, since the home cost is low
c) Yes, regardless of the down payment
d) No, because the down payment is sufficient

Answer 1

Morty will be required to purchase primary mortgage insurance (PMI) because his down payment of $35,000 is less than 20% of the home's cost, which would be $47,000 for a $235,000 home.

Step-by-step explanation:

Morty has purchased a home for $235,000 and paid a down payment of $35,000. To determine whether he needs to purchase primary mortgage insurance (PMI), we need to calculate if Morty’s down payment is less than 20% of the purchase price. The 20% down payment on a $235,000 home would be $47,000. Since Morty only paid $35,000, which is less than 20%, he will indeed be required to purchase PMI.

Therefore, the correct answer to Morty’s question is: a) Yes, because the down payment is less than 20%.