You have found a home that you are interested in purchasing. Instead of a conventional loan, you agree to pay the premium for the private mortgage insurance (PMI), which finances 95% of the loan. The amount of the home is listed at $125,000. From the given information, determine the amount needed for the down payment to qualify for the PMI loan.
If the loan finances 95% of the home’s price, the down payment covers the remaining 5%. Calculate 5% of $125,000: 0.05 × $125,000 = $6,250. The correct choice is $6,250.
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