Escrow & Title
A Virginia seller has $50,000 equity in their home. At closing, their agent informs them the buyer's lender requires that the seller pay 2 discount points on the buyer's $320,000 loan. How much must the seller pay?
A$3,200
B$6,400✓ Correct
C$6,000
D$1,600
Explanation
1 discount point = 1% of the loan amount. 2 points × 1% × $320,000 = 2% × $320,000 = $6,400.
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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.
ProrationThe division of ongoing property expenses (taxes, HOA dues, rents) between buyer and seller at closing based on their respective days of ownership.
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.
Math Concepts
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