Real Estate Math
A Massachusetts property is purchased for $450,000 with a 25% down payment. If the lender charges 1.5 loan origination points, what is the cost of the points?
A$5,062.50✓ Correct
B$6,750.00
C$3,375.00
D$4,500.00
Explanation
Loan amount = $450,000 × 75% = $337,500. Points cost = $337,500 × 1.
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Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
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.
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.
Math Concepts
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