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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PMI will no longer be necessary on a loan when the LTV reaches 75%. If a $178,000 loan was made at 100% LTV and the property has appreciated to $210,000, how much of the principal must be paid off before PMI can be dropped?

$157,500
$42,000
$20,500
$178,000

The correct answer is: $20,500

When the LTV reaches 75%, PMI is no longer necessary on a loan according to the scenario given. The loan amount issued was equal to the value of the property, resulting in a 100% LTV. As the property has appreciated to $210,000, the current LTV is now 85.2%, which means that $38,000 of the principal must be paid off in order for the LTV to reach 75% and for PMI to be dropped. Therefore, the answer of $20,500 for option C is correct. Options A, B, and D are incorrect because they do not take into account the appreciation of the property and do not align with the given scenario. Option A is the total amount of the loan, option B is the amount of the appreciation, and option D is the initial loan amount which has not changed.