Which borrower is not required to pay PMI when securing a conventional loan?

In the context of conventional loans, private mortgage insurance (PMI) is typically required when a borrower has less than a 20% down payment. This means that PMI protects the lender in the event that the borrower defaults on the loan.

Lori, who is borrowing $150,000 for a $250,000 house, is putting down a larger percentage than 20%. To calculate the down payment percentage, we can find the difference between the home price and the loan amount. The down payment Lori is making is $100,000 ($250,000 - $150,000). This translates to a down payment of 40%, which is well above the 20% threshold. Therefore, she would not be required to pay PMI since her down payment significantly reduces the lender's risk.

In contrast, both Kevin and Maurice would need to pay PMI because their down payments fall below the 20% requirement. Kevin's loan amount represents 85% of the home's value, indicating a 15% down payment, while Maurice's loan amount is equal to the home's full value, which indicates no down payment and thus also would require PMI. The statement in the answer choice about PMI being relevant only for FHA-insured loans is misleading, as PMI