Alana purchases a home in Kauai for $800,000 and obtains a conventional mortgage with a 20% down payment. The lender charges a loan origination fee of 1.5% of the loan amount. What is the total amount of the loan origination fee Alana will pay at closing?
Correct Answer
A) $9,600
Step 1: Calculate the loan amount. Purchase price = $800,000; Down payment = 20% × $800,000 = $160,000; Loan amount = $800,000 − $160,000 = $640,000. Step 2: Calculate the origination fee. Origination fee = 1.5% × $640,000 = 0.015 × $640,000 = $9,600. The origination fee is calculated on the loan amount, not the purchase price.
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Related Topics & Key Terms
Key Terms:
Related Concepts
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
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