What affects Private Mortgage Insurance (PMI)?

Private Mortgage Insurance (PMI) is primarily influenced by the loan-to-value (LTV) ratio because PMI is typically required when a borrower makes a down payment of less than 20% of the home's purchase price. A higher LTV ratio indicates more risk for the lender, increasing the likelihood that PMI will be necessary. This makes LTV a significant factor in determining PMI premiums.

The adjustable-rate mortgage (ARM) component can also play a role in PMI considerations, as different loan types may have varying requirements for insurance. The term of the loan, such as 15 or 30 years, can influence the cost of PMI as it may affect the risk profile of the loan. The concept of FLCO (First Loan Company Obligation) is not as commonly referenced but can be related to the lender's overall requirements based on the structure of the mortgage and their policies.

In contrast, the other answer choices highlight factors that, while relevant to the overall mortgage process or borrower qualification, do not directly impact PMI in the same way. For instance, loan type can affect insurance but in a less direct manner than LTV, and aspects like borrower income, property location, credit score, and market trends contribute to risk assessments and loan approval but are not