A borrower paid $3,000 in discount points on a $150,000 loan. How many points did the borrower purchase?
Correct Answer
C) 2 points
Each point equals 1% of the loan amount. $3,000 ÷ $150,000 = 0.02 or 2%. Therefore, the borrower purchased 2 discount points.
Why This Is the Correct Answer
Each point equals 1% of the loan amount. $3,000 ÷ $150,000 = 0.02 or 2%. Therefore, the borrower purchased 2 discount points.
More Mortgage Knowledge Questions
A borrower is comparing two loan offers: Loan A has no points and 4.5% interest rate, Loan B has 2 points and 4.0% interest rate. The loan amount is $400,000. How much will the borrower pay upfront for the points on Loan B?
A lender charges a 1% origination fee on all loans. For a borrower obtaining a $250,000 mortgage, what is the maximum origination fee that can be charged without violating the points and fees test under the ATR/QM rule for a first-lien mortgage?
Under what circumstances can a Qualified Mortgage include a prepayment penalty?
A borrower is considering paying discount points to reduce their interest rate. Each point costs 1% of the loan amount and reduces the rate by 0.25%. On a $300,000 loan, how much would the borrower pay for 2 discount points?
A borrower asks about the difference between discount points and origination fees. What is the most accurate explanation?
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