Discount points paid at loan closing serve what purpose?
Why Each point equals 1% of the loan amount and can buy down the interest rate Is Correct
Answer B: Each point equals 1% of the loan amount and can buy down the 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 Delaware Questions
- Private mortgage insurance (PMI) is typically required when a conventional loan has a down payment of less than:Finance
- What is 'private mortgage insurance' (PMI) and when is it typically required in Delaware?Finance
- Title insurance protects against:Escrow & Title
- A lender's title insurance policy protects:Escrow & Title
- A buyer's loan-to-value ratio is 80% on a $450,000 purchase. What is the required down payment?Real Estate Math
- A Delaware buyer obtains a 30-year fixed-rate mortgage at 7% interest for $250,000. The 'fixed-rate' means:Finance
- A buyer obtains a $300,000 mortgage at 6% annual interest. What is the first month's interest payment?Real Estate Math
- A Delaware investor buys a rental property for $350,000 and puts 25% down. The monthly mortgage payment (P&I) is $1,495. The property generates $2,200/month rent. Monthly operating expenses are $600. What is the monthly cash flow after mortgage?Real Estate Math
Key Terms to Know
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
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.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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.
Math Concepts
Study This Topic
Practice More Delaware Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Delaware Quiz →