Finance
A Wisconsin lender charges 2 discount points on a $160,000 loan. The dollar amount of the points is:
A$1,600
B$2,400
C$3,200✓ Correct
D$4,800
Explanation
1 discount point = 1% of the loan amount. 2 points = 2% × $160,000 = $3,200.
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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.
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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
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