California Real Estate Practice Exam

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Study for the California Real Estate Exam with confidence. Engage with interactive questions designed to enhance your understanding of real estate principles, laws, and practices. Prepare thoroughly for your licensing test and ensure you have the knowledge to succeed in your real estate career!

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At what point will a buyer stop paying for PMI on a property purchased for $260,000 with 100% financing?

When he has paid off $26,000
When the property value increases
When he has paid off $65,000
After 5 years of payments

The correct answer is: When he has paid off $65,000

A) When he has paid off $26,000 This option is incorrect because PMI (Private Mortgage Insurance) is typically required when a buyer does not have a down payment of 20% or more. So, in this scenario, the buyer has 100% financing and therefore will be required to pay PMI. B) When the property value increases: This option is incorrect because PMI is based on the original purchase price of the property, not the value of the property over time. D) After 5 years of payments: This option is incorrect because the length of time for paying PMI can vary and is not necessarily tied to a specific number of years. It is based on the remaining balance on the loan and when the buyer reaches a certain loan-to-value ratio. In this scenario, it is when the buyer has paid off $65,000, or 25% of the original purchase price.