70. A homebuyer received a conventional loan with a down payment of 8% of the purchase price. The mortgage payment (PITI) will be reduced without refinancing when
Answer: B
The mortgage payment (PITI) will be reduced without refinancing when equity reaches 22%.
When a homebuyer reaches 22% equity in their home, they can request the removal of private mortgage insurance (PMI), which can significantly lower their monthly mortgage payment (PITI) without the need for refinancing.
A) Income increases.
While an increase in income may allow the homebuyer to afford larger payments or pay down the mortgage faster, it does not directly affect the monthly mortgage payment (PITI) structure or reduce it unless it leads to changes in financial obligations or refinancing options.
B) Equity reaches 22%.
This option is correct because once the homeowner has paid down enough of the mortgage or if the property value increases, they can achieve 22% equity. At this point, they can request to eliminate PMI, thereby reducing their monthly payment (PITI) without needing to refinance.
C) A child is adopted.
Adopting a child does not have any direct impact on the mortgage payment (PITI). While it may influence the buyer's overall financial situation or budget for housing, it does not affect the loan terms or insurance requirements.
D) The assessed value increases.
An increase in the assessed value of the home may indirectly contribute to increasing equity, but it does not automatically reduce the mortgage payment (PITI). Until the homeowner reaches the 22% equity threshold, the PMI will still apply, maintaining the current payment level.
Conclusion
The correct answer is B, as reaching 22% equity is the specific condition under which the homebuyer can reduce their monthly mortgage payment (PITI) without refinancing by eliminating PMI. All other options do not provide a direct mechanism to lower the payment, either by failing to address the PMI requirement or by being unrelated to the mortgage terms.