What is a 'loan discount point'?
Why Prepaid interest paid at closing to reduce the loan's interest rate, with each point equaling 1% of the loan amount Is Correct
Answer B: Prepaid interest paid at closing to reduce the loan's interest rate, with each point equaling 1% of the loan amount
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
- 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 pays $1,610/month in principal and interest on a 30-year fixed mortgage at 6.5%. If the original loan amount was $254,000, how much total interest is paid over the life of the loan?Real Estate Math
- Discount points paid on a mortgage loan are best described as:Finance
- Which type of mortgage loan has a fixed interest rate for an initial period, then adjusts periodically based on a market index?Finance
- What term describes the process by which a lender reduces the risk of an ARM by capping how much the interest rate can change at each adjustment period and over the life of the loan?Finance
- A buyer puts 20% down on a $500,000 home. What is the loan amount?Real Estate Math
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.
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.
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 →