Finance
A Washington seller agrees to pay two discount points to buy down a buyer's interest rate. If the loan amount is $380,000, what is the cost of the points?
A$3,800
B$7,600✓ Correct
C$9,500
D$11,400
Explanation
One discount point equals 1% of the loan amount. Two points = 2% × $380,000 = $7,600.
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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.
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.
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.
Math Concepts
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