Finance
A Minnesota lender charges 2 discount points on a $200,000 mortgage. How much will the borrower pay in points at closing?
A$2,000
B$4,000✓ Correct
C$6,000
D$1,000
Explanation
Each discount point equals 1% of the loan amount. 2 points = 2% x $200,000 = $4,000.
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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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Math Concepts
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