Real Estate Math
A Massachusetts property with a $1,100,000 purchase price is acquired with a 30% down payment. The lender charges 1.5 points. What is the total cost of points?
A$11,550✓ Correct
B$16,500
C$33,000
D$4,950
Explanation
Loan = $1,100,000 × 70% = $770,000. Points cost = $770,000 × 1.
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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.
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.
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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