You have found a home that you are interested in purchasing. Instead of a conventional loan, you agree to pay the premium for the private mortgage insurance (PMI), which finances 95% of the loan. The amount of the home is listed at $125,000. From the given information, determine the amount needed for the down payment to qualify for the PMI loan.
a.
$6,250
c.
$625
b.
$118,750
d.
$62,500

Question

You have found a home that you are interested in purchasing. Instead of a conventional loan, you agree to pay the premium for the private mortgage insurance (PMI), which finances 95% of the loan. The amount of the home is listed at $125,000. From the given information, determine the amount needed for the down payment to qualify for the PMI loan.
a.
$6,250
c.
$625
b.
$118,750
d.
$62,500

beth12345 · Answer

The PMI finances 95% of the loan, this means that the remaining 5% is the amount that you need to pay (the down payment amount). To find the 5% of 125,000 , you simply times that amount by 0.05.

beth12345 · Answer

multiplying by 0.05 gives 5% of the original amount, for example, if you wanted to find any other percentage such as the 95%, you would simply multiply the original amount by 0.95 and so on and so forth.

beth12345 · Answer

Hope this is clear :)