A property's purchase price is $180,000 with a 20% down payment. The buyer also pays 2 points on the loan. What is the total cost of the points?
Why $2,880 Is Correct
Answer A: $2,880
Exam Tip: Real Estate Math
Math questions are formula-based. Memorize the key formulas: commission splits, proration, cap rate (NOI ÷ Value), GRM (Price ÷ Gross Rent), and LTV (Loan ÷ Value). Practice converting between annual and monthly figures.
People Also Study
Related Alabama Questions
- A buyer obtains an 80% loan-to-value mortgage on a home. The purchase price is $275,000. What is the required down payment?Real Estate Math
- What is the primary purpose of discount points on an Alabama mortgage loan?Finance
- A buyer in Alabama puts 10% down on a $320,000 home. What is the loan amount?Real Estate Math
- Private mortgage insurance (PMI) is typically required in Alabama when the borrower's down payment is less than:Finance
- An Alabama buyer qualifies for a $250,000 loan with a monthly payment of $1,500. What is the annual debt service?Finance
- A buyer makes a down payment of $45,000 on a $300,000 home in Alabama. What is the LTV ratio?Real Estate Math
- A conventional loan with a down payment of less than 20% typically requires:Finance
- An investor buys a building for $500,000 with a 25% down payment. What is the loan amount?Real Estate Math
Key Terms to Know
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
Math Concepts
Study This Topic
Practice More Alabama Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Alabama Quiz →