For which types of loans is private mortgage insurance (PMI) typically required?

Private mortgage insurance (PMI) is typically required for conventional loans when the borrower makes a down payment of less than 20% of the home's purchase price. This insurance protects the lender in case the borrower defaults on the loan. When the down payment is less than 20%, the risk associated with the loan increases from the lender's perspective, necessitating additional insurance to mitigate potential losses.

In contrast, FHA loans have their own mortgage insurance requirements, which do not rely on the same down payment thresholds as conventional loans. VA loans, designed for eligible veterans and service members, do not require PMI at all, regardless of the down payment amount, because they are backed by the government. Therefore, PMI is specifically linked to conventional loans under these conditions, making this option the only correct answer in this context.