_____________ is the money paid to insure the mortgage when the down payment is less than 20 percent
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A. B. C. D.D
The correct answer is D. Mortgage Insurance.
When a homebuyer makes a down payment of less than 20% of the purchase price of a home, the lender may require the borrower to purchase mortgage insurance. Mortgage insurance is a type of insurance policy that protects the lender in case the borrower defaults on the loan. The insurance premium is typically paid by the borrower and is included in the monthly mortgage payment.
Mortgage insurance is designed to reduce the risk to the lender of making a loan to a borrower who has a small down payment. It allows lenders to offer loans with a lower down payment, which can make homeownership more accessible to first-time homebuyers or those who may not have a large savings for a down payment.
There are two types of mortgage insurance: private mortgage insurance (PMI) and government mortgage insurance. PMI is typically required by conventional lenders, while government mortgage insurance is required for certain government-backed loans such as FHA loans.
The cost of mortgage insurance varies depending on the loan amount, the down payment amount, and the type of mortgage insurance policy. It is usually calculated as a percentage of the loan amount and can range from 0.3% to 1.5% of the loan amount per year.
In summary, mortgage insurance is a type of insurance policy that protects the lender in case the borrower defaults on the loan. It is typically required when the down payment is less than 20% of the purchase price of a home, and the premium is paid by the borrower and included in the monthly mortgage payment.