Final answer:
When a lender loans a borrower 100% of the purchase price of a house, the lender would be best protected by requiring the borrower to get mortgage insurance.
Step-by-step explanation:
When a lender loans a borrower 100% of the purchase price of a house, the lender would be best protected by requiring the borrower to get mortgage insurance. Mortgage insurance helps protect the lender if the borrower is unable to make payments and goes into default.
By requiring mortgage insurance, the lender is transferring the risk to a third-party insurance company. If the borrower defaults on the loan, the insurance company will compensate the lender for the loss.
For example, if a borrower purchases a house for $100,000 and borrows the full amount from the bank, the lender would require the borrower to get mortgage insurance to protect their investment.