Finance
A NJ lender requires a borrower to pay 2 discount points on a $280,000 mortgage. How much will the borrower pay at closing for the points?
A$2,800
B$5,600✓ Correct
C$560
D$14,000
Explanation
Each discount point equals 1% of the loan amount. 2 points × 1% × $280,000 = 0.
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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.
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.
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.
Math Concepts
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