Real Estate Math
An Illinois buyer is purchasing a home for $285,000 with a 10% down payment. The lender charges 1 origination point and 1 discount point. What is the total points cost?
A$2,850
B$5,130✓ Correct
C$5,700
D$28,500
Explanation
Loan amount = $285,000 × 0.90 = $256,500. Total points = 2 (1 origination + 1 discount). Points cost = 2% × $256,500 = $5,130. Each point equals 1% of the loan amount (not the purchase price). Origination points are fees for processing the loan; discount points are prepaid interest to reduce the interest rate. Both are calculated on the loan amount.
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