Real Estate Math
A Wisconsin buyer pays $3,750 in points on a $250,000 mortgage. How many points did they pay?
A1 point
B1.5 points✓ Correct
C2 points
D2.5 points
Explanation
1 point = 1% of the loan amount = $250,000 × 1% = $2,500. Points = $3,750 / $2,500 = 1.
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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.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
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