What LTV percentage typically requires the payment of Private Mortgage Insurance (PMI)?

The correct choice, which indicates that an LTV (Loan-to-Value) percentage of 80% or more typically requires the payment of Private Mortgage Insurance (PMI), is based on standard lending practices. LTV is calculated by dividing the loan amount by the appraised value of the property, expressed as a percentage. When the LTV ratio exceeds 80%, lenders perceive a greater risk because the buyer is financing a significant portion of the property's value.

Private Mortgage Insurance serves as a safeguard for the lender in case the borrower defaults on the loan. It generally becomes a requirement when the borrower puts down less than 20% of the property's value. Hence, if the LTV is at 80% or greater, lenders will often mandate that borrowers obtain PMI to protect their investment. This requirement is intended to mitigate the increased risk of loss associated with higher LTV ratios.

In real estate financing, maintaining a lower LTV is often beneficial for buyers, not only by avoiding PMI costs but also by potentially securing better loan terms and interest rates.