Finance
Points paid by a Virginia borrower on a new home purchase are:
APaid monthly over the loan term
BPrepaid interest paid at closing to reduce the interest rate✓ Correct
CPenalties for early payoff
DRequired on all conventional loans
Explanation
Discount points are prepaid interest paid at closing to buy down (reduce) the mortgage interest rate. Each point equals 1% of the loan amount.
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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.
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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