What is generally required for conventional loans regarding private mortgage insurance?

Private mortgage insurance (PMI) is typically required for conventional loans when the loan-to-value (LTV) ratio exceeds 80%. This means that if the borrower makes a down payment of less than 20% of the home's purchase price, lenders usually require PMI. This insurance protects the lender against the risk of default, as a higher LTV ratio indicates that the borrower has less equity in the property.

In situations where the LTV ratio is 80% or lower, the borrower has a sufficient amount of equity, which reduces the lender's risk and eliminates the need for PMI. Thus, if the borrower is able to secure a loan with an LTV ratio of 80% or lower, they can avoid the additional cost associated with PMI. This understanding is critical for borrowers considering conventional loans, as it directly affects both their upfront costs and monthly payments.