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Copyright 0 2017 by University of Phoenix. All rights reserved Homes Renting and Buying Worksheet FP/100 Version 1 Note: Does this amount seem reasonable for this scenario? If not, double-check your calculations. If you were buying a home valued at $215,000, what is the minimum down payment you would need in order to avoid paying private mortgage insurance (PMI)? PMI is requested to protect the lender from potential default loss when there is insufficient equity in a home. 5. 6. Debt payments-to-income ratios will lkely be considered as you apply for a mortgage. The Focus on Personal Finance text suggests keeping this ratio below 20%. A mortgage lender will have their own ratio for all debt payments, including mortgage-to-income ratio, before they will consider approval Using this information, answer the questions and show your calculations in the table below . Net monthly income: $4 000 Expected full mortgage payment (PITI) $1.000

Solution

5) Private mortgage insurance (PMI) is an insurance policy that protects lender from the risk of default and foreclosure. It also allows buyers to obtain mortgage financing at affordable rates, who cannot able to make a significant down payment (or those who choose to not to) . If you buy a home and put down less than 20%, then lender will minimize its risk by requiring you to buy insurance from a PMI company prior to signing off on the loan.

So Minimum down payment will be 20% to Avoid PMI.
Minimum Down Payment will be = 215,000 * 20%

= 43,000$

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