A buyer purchases a home in Ohio for $400,000 with a 10% down payment. The lender charges 2 discount points. How much does the buyer pay in discount points?
Correct Answer
C) $7,200
Down payment = 10% × $400,000 = $40,000. Loan amount = $400,000 − $40,000 = $360,000. Discount points = 2% × $360,000 = $7,200. Points are calculated on the loan amount, not the purchase price.
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Related Concepts
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
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%.
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Previous Question
An Ohio property closes on September 15. Annual property taxes are $5,400 and are paid in arrears. Using a 360-day year, what is the seller's property tax proration credit to the buyer (January 1 through September 15)?
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A property in Ohio sold for $275,000. The seller's agent earns a 3% commission and the buyer's agent earns a 3% commission. What is the total commission paid?