What is the difference between APR and interest rate?
Why APR includes the interest rate plus other loan costs (fees, points), making it typically higher than the stated interest rate Is Correct
Answer B: APR includes the interest rate plus other loan costs (fees, points), making it typically higher than the stated interest 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
People Also Study
Related California Questions
- The annual percentage rate (APR) on a loan differs from the interest rate because it includes:Finance
- A lender charges 2 discount points and a 1% origination fee on a $350,000 loan. What is the total amount the borrower pays in points and origination fees at closing?Real Estate Math
- A seller agrees to pay 3.5 discount points on a buyer's $320,000 loan to buy down the interest rate. How much will the seller pay in points?Real Estate Math
- Discount points paid at loan origination are used to:Finance
- A borrower takes out a $300,000 mortgage at 6% annual interest. What is the first month's interest payment?Real Estate Math
- Discount points paid on a mortgage loan are best described as:Finance
- A buyer takes out a $400,000 mortgage at 6% annual interest. What is the simple interest amount due for the first month?Real Estate Math
- Which type of mortgage loan has a fixed interest rate for an initial period, then adjusts periodically based on a market index?Finance
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
Study This Topic
Practice More California Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free California Quiz →