Loan Signing and Real Estate Practice Test 2026 – All-in-One Guide to Master Your Exam Success!

To avoid Private Mortgage Insurance (PMI) on a conventional loan, a borrower typically must make a down payment of at least 20%. PMI is a type of insurance that lenders require from homebuyers who obtain mortgages that are more than 80% of the property's value, meaning they have less than a 20% equity stake in the home.

When the borrower makes a down payment of 20% or more, it reduces the lender’s risk, as the borrower has more equity in the property at the outset. Therefore, the requirement of a 20% down payment eliminates the need for PMI, allowing the borrower to save money on monthly payments and avoid the additional costs associated with this insurance.

While a down payment of at least 10% might reduce the necessity for PMI in some specific cases or with certain lenders, it does not universally eliminate it, which is why a 20% down payment is the standard requirement to avoid PMI. Other options such as having a co-signer or maintaining a long credit history do not directly influence the requirement for PMI in the same way. A co-signer may help with approval or interest rates, and a long credit history can improve creditworthiness, but they do not affect the PMI obligation tied