Finance
Discount points paid by a borrower at closing are used to:
ACover the lender's origination costs
BPrepay interest and buy down the loan's interest rate✓ Correct
CPurchase title insurance for the lender
DFund the borrower's escrow account for taxes and insurance
Explanation
Each discount point equals 1% of the loan amount and is paid to the lender to reduce (buy down) the interest rate. Paying points upfront can reduce the monthly payment and total interest paid over the life of the loan.
Related Connecticut Finance Questions
- What is the primary purpose of the federal Truth-in-Lending Act (TILA/Regulation Z) in Connecticut mortgage lending?
- A Connecticut homeowner has a first mortgage of $300,000 and a home equity line of credit (HELOC) of $50,000. If the homeowner defaults and the property sells for $330,000 at foreclosure, how are the proceeds distributed?
- What is 'amortization' in the context of a mortgage loan?
- Under the Community Reinvestment Act (CRA), banks and savings institutions are required to:
- A Connecticut buyer is considering an adjustable-rate mortgage (ARM). Which statement is TRUE about ARMs?
- A Connecticut buyer's loan is being processed. The lender orders an appraisal that comes in $15,000 below the purchase price. Which outcome is most likely?
- A Connecticut borrower's total monthly debt obligations are $2,800 and gross monthly income is $8,000. What is the back-end DTI ratio?
- A 'prepayment penalty' in a Connecticut mortgage loan penalizes the borrower for:
Practice More Connecticut Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Connecticut Quiz →