California Real Estate Practice Exam

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Master the California Real Estate Exam with our comprehensive practice quiz. Get expert tips, detailed content review, and insider strategies to pass on your first try.

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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.