Question

What is typically required when a borrower has a down payment of less than 20%?

A) Higher interest rates
B) Larger mortgage amount
C) Mortgage default insurance
D) No additional requirements

Answer 1

When a borrower has a down payment of less than 20%, typically mortgage default insurance is required to protect the lender in case of default.

Step-by-step explanation:

When a borrower has a down payment of less than 20%, typically mortgage default insurance is required. This insurance helps protect the lender in case the borrower is unable to make payments and defaults on the loan. It is an additional fee that is wrapped into the cost of the home, which increases the mortgage amount over time.