Final answer:
Lenders generally require borrowers to pay Private Mortgage Insurance (PMI) when they make a down payment that is less than 20% of the home's purchase price. For loans with less than a 20% down payment but not conventional loans, such as FHA loans, MIP or UFMIP may be applicable. The correct option is d.
Step-by-step explanation:
Lenders who make conventional loans where the buyer provides less than a 20% down payment normally require that the borrower pay Private Mortgage Insurance (PMI). This type of insurance is designed to protect the lender in case the borrower defaults on their mortgage payments.
PMI is a common requirement when the loan-to-value ratio exceeds 80%, meaning the down payment is less than 20% of the home's purchase price. For loans such as FHA loans, a different type of insurance, called a Mortgage Insurance Premium (MIP) or an up-front mortgage insurance premium (UFMIP) may be required instead.
An insurance premium is the amount of money that an individual or business must pay for an insurance policy, which in the context of a mortgage, helps to protect the lender against the risk of default. Offering a higher down payment, showing proof of a steady income, and maintaining a good credit score are some ways to reassure a bank when they have imperfect information about a borrower's ability to repay the loan.
Hence, Option d is correct.