Real Estate Math
A buyer pays $2,800 in discount points on a $200,000 loan. How many points did the buyer pay?
A1 point
B1.4 points✓ Correct
C2 points
D2.8 points
Explanation
One point = 1% of the loan amount. $200,000 x 1% = $2,000 per point.
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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.
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.
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