Which statement about PMI on conventional loans is true?

• A. PMI is required only if loan-to-value is above 80%.
• B. PMI is always required regardless of LTV.
• C. PMI is never required on conventional loans.
• D. PMI is required only for first-time homebuyers.

Answer: (A)

PMI on conventional loans is driven by how much of the home's value you’re borrowing relative to the purchase price. Private Mortgage Insurance protects the lender when the down payment is small, meaning the loan-to-value is high. On conventional loans, PMI is typically required whenever the loan amount exceeds 80% of the home’s value (that is, when the down payment is less than 20%). If you put down 20% or more, PMI is usually not required. So the statement that PMI is required only if the LTV is above 80% aligns with the standard rule.

The other choices don’t fit because PMI isn’t required regardless of down payment (not always), it isn’t never required, and it isn’t limited to first-time homebuyers—the requirement is about how much you’re borrowing relative to value, not borrower status.