45. A buyer wants a fixed-rate, conventional loan and puts 20% down. The buyer would
Answer: D
The buyer would not need private mortgage insurance on the loan.
Since the buyer is making a 20% down payment on a fixed-rate, conventional loan, they are not required to pay for private mortgage insurance (PMI). PMI is typically necessary when the down payment is less than 20%.
A) need a mortgage insurance premium on the loan.
This option is incorrect because the requirement for a mortgage insurance premium is generally associated with down payments of less than 20%. Since the buyer is putting down 20%, they do not need this insurance.
B) need a life insurance policy equivalent to the amount of the loan.
This option is also incorrect. While some lenders may suggest life insurance to cover the loan in case of the borrower's death, it is not a requirement for obtaining a fixed-rate, conventional loan, especially with a 20% down payment.
C) not need to pay for a title policy.
This option is misleading. While a title policy is not directly related to the down payment amount, it is still typically required to protect against title defects. Therefore, this statement does not accurately reflect the implications of the down payment amount.
D) not need private mortgage insurance on the loan.
This option is correct because with a 20% down payment, the buyer does not need to pay for private mortgage insurance (PMI). This is a standard practice in conventional loans, where a 20% down payment eliminates the need for additional mortgage insurance costs.
Conclusion
The correct answer is D, as a 20% down payment on a conventional loan exempts the borrower from the necessity of private mortgage insurance. Options A, B, and C either misinterpret the requirements associated with the loan or do not pertain to the down payment scenario, highlighting that a significant down payment provides financial benefits for the borrower.