The type of mortgage you qualify for can dictate the amount of money you need to put down for a new home purchase. Your down payment then affects your loan-to-value ratio, which measures loan balance against the home’s current market value.
Watch the video to learn more about Down Payment and Loan-to-Value Ratio concepts, then test your knowledge at the end of the lesson.
Traditional fixed-rate loans may require 20% down, while adjustable-rate mortgages usually require:
A. 3% down payment
B. 5% down payment
C. 7% down payment
D. 10% down payment
Most lenders cap a combined loan-to-value ratio at 90% but as you pay off your mortgage, if the home value increases, so will your LTV.
A. True
B. False
Which of the following statements best describes the purpose of private mortgage insurance (PMI)?
A. PMI protects the Realtor in case you back out of the deal.
B. PMI protects your credit in case you struggle to make payments.
C. PMI protects your property in case there is a natural disaster.
D. PMI protects the lender in case you can’t pay back what you owe.