Private Mortgage Insurance (PMI) is usually required on loans with LTV ratios greater than what percentage?

Private Mortgage Insurance (PMI) is typically required on conventional loans when the loan-to-value (LTV) ratio exceeds 80%. The reason for this requirement is that an LTV over 80% indicates a higher risk for lenders because the borrower is financing a larger percentage of the property’s value. PMI protects the lender in case the borrower defaults on the loan, as it provides a financial safeguard against losses that may occur if the property is repossessed and sold for less than the outstanding loan balance.

When the LTV is at or below 80%, borrowers are usually seen as having a sufficient equity stake in the property, which mitigates the lender's risk and, therefore, typically does not necessitate PMI. This requirement helps both lenders and borrowers, allowing purchasers to enter the housing market with a smaller down payment while also ensuring that lenders can manage their risk exposure in the event of default.