Lena Chen is buying a home for $350,000 and is making a 20% down payment. Her lender will charge 2 discount points on the loan amount. How much will Lena pay for the points at closing?
Correct Answer
C) $5,600
Step 1: Loan amount = $350,000 × 80% = $280,000. Step 2: Points cost = $280,000 × 2% = $5,600. Because points are calculated on the loan amount rather than the purchase price, Lena will pay $5,600.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs available to eligible veterans, active-duty service members, and surviving spouses. It offers no down payment and no private mortgage insurance requirements.
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
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