The discount points paid by a borrower at closing primarily serve to:
Why Lower the interest rate on the loan (buying down the rate) Is Correct
Answer B: Lower the interest rate on the loan (buying down the rate)
Exam Tip: Finance
Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.
Key Finance Terms in This Question
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Key Terms to Know
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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