Does a lender require PMI for a loan being financed at 80%?

When a loan is financed at 80%, it means that the borrower is making a down payment of 20% of the property's purchase price. This scenario is significant because private mortgage insurance (PMI) is typically required for loans where the down payment is less than 20%. Lenders require PMI as a safeguard against the potential of default when the buyer has a smaller equity stake in the property.

Since the loan being financed is at 80% LTV (loan-to-value), having a down payment of 20% indicates that the borrower has a solid equity position in the property. This reduced risk for the lender eliminates the need for PMI. Thus, the correct answer highlights that there is no PMI requirement, as the borrower has surpassed the threshold of a 20% down payment.

In short, the absence of PMI in this context is a standard practice, as it reflects a more favorable loan-to-value ratio for the lender, indicating that the borrower is less of a risk.