Question

Pamela is buying a $242,000 home with a 30-year mortgage. She will make

an 8% down payment. Use the table below to find her monthly PMI payment.
Base-To-Loan %
95.01% to 97%
90.01% to 95%
85.01% to 90%
85% and Under
OA. $96.48
OB. $144.72
OC. $157.30
OD. $151.01
Fixed-Rate Loan
30 yrs. 15 yrs.
0.90% 0.79%
0.78% 0.26%
0.52% 0.23%
0.32% 0.19%
ARM 2% +1 Year Cap
30 yrs.
15 yrs.
n/a
0.92% 0.81%
0.65%
n/a
0.37%
0.54%
0.26%

Answer 1

To find Pamela's monthly PMI payment, we first need to determine which base-to-loan percentage range she falls into. Since she is making an 8% down payment, the loan-to-value (LTV) ratio would be 92%. Let's compare this to the given ranges:

Base-To-Loan %
95.01% to 97%
90.01% to 95%
85.01% to 90%
85% and Under

In this case, Pamela falls into the "90.01% to 95%" range. Now, we need to find the corresponding PMI rate for a fixed-rate loan with a term of 30 years.

Fixed-Rate Loan
30 yrs.
0.90% 0.79%
0.78% 0.26%
0.52% 0.23%
0.32% 0.19%

According to the table, the PMI rate for Pamela's situation is 0.78%.

Next, we calculate the monthly PMI payment using the loan amount and the PMI rate. Since Pamela is buying a $242,000 home and making an 8% down payment, the loan amount would be 92% of $242,000:

Loan amount = 0.92 * $242,000 = $222,640

To calculate the monthly PMI payment, we multiply the loan amount by the PMI rate and divide it by 12 (months):

Monthly PMI payment = ($222,640 * 0.78%) / 12

Now, let's perform the calculation:

Monthly PMI payment = ($222,640 * 0.0078) / 12
= $1736.83 / 12
= $144.74

Therefore, Pamela's monthly PMI payment is approximately $144.74.

From the provided options, the closest value to the calculated monthly PMI payment is option OB: $144.72.

Answer 2

To find Pamela's monthly PMI payment, we need to determine her loan-to-value (LTV) ratio based on her down payment and loan amount. Given that she is making an 8% down payment on a $242,000 home, her loan amount would be 92% of the purchase price, which is $242,000 * 0.92 = $222,640.

Looking at the "Base-To-Loan %" table, we see that Pamela's LTV ratio falls within the range of "90.01% to 95%". To determine her monthly PMI payment, we refer to the "Fixed-Rate Loan" column for a 30-year term, which has a corresponding PMI rate of 0.78%.

To calculate the PMI payment:
PMI payment = (Loan amount * PMI rate) / 12

PMI payment = ($222,640 * 0.0078) / 12 = $144.72

Therefore, Pamela's monthly PMI payment would be $144.72 (Option B).