For loans exceeding what percentage of value do lenders typically require mortgage insurance?

Lenders typically require mortgage insurance for loans that exceed 80% of the property's appraised value or purchase price, depending on which is lower. This requirement is in place because loans with a higher loan-to-value (LTV) ratio present a greater risk to lenders. When a borrower puts down less than 20% of the property value, the mortgage insurance helps protect the lender in the event of a default. By requiring mortgage insurance, lenders mitigate potential losses and provide borrowers with the opportunity to secure financing even with a smaller down payment.

Understanding this threshold is essential for anyone entering real estate, as it affects loan options, costs, and overall affordability for prospective homeowners. Knowing the 80% benchmark can also guide buyers in their financial planning and down payment strategies.