Real Estate Math
A Hawaii buyer offers $850,000 with 20% down. The lender requires 1.5 points at origination. What are the loan origination points in dollars?
AA. $10,200✓ Correct
BB. $12,750
CC. $14,250
DD. $8,500
Explanation
Loan amount = $850,000 × (1 - 0.20) = $850,000 × 0.
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Key Terms to Know
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.
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.
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.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
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