A buyer is obtaining a $310,000 loan at 5% interest with a 20% down payment on a $387,500 purchase price. The lender is charging 3 discount points. Calculate the discount points due at closing

Rationale

$9,300 is the amount due for discount points at closing.

Discount points are calculated as a percentage of the loan amount, with one point equating to 1% of the total loan. In this scenario, the loan amount after the down payment is $248,000, and with 3 points charged, the calculation results in $9,300 due at closing.

A ($312) YOUR ANSWER

This figure represents a miscalculation, as it does not accurately reflect the 3% charge on the loan amount. It is far too low to be the total due for discount points based on the loan amount of $248,000.

B ($8,988) YOUR ANSWER

This amount also fails to align with the correct calculation for discount points. It seems to be an incorrect calculation, possibly derived from an erroneous loan amount or percentage rate, but it does not reflect the reality of the 3 points on the correct loan amount.

C ($9,300) CORRECT

This is the correct amount calculated for the discount points. The calculation is derived from taking 3% of the loan amount of $310,000, which after the down payment results in $248,000. Thus, 3 points of $248,000 equals $9,300.

D ($319,300) YOUR ANSWER

This option incorrectly combines the loan amount with the down payment or misrepresents the nature of discount points. Discount points are a cost associated with the loan itself, not an addition to the loan amount or total purchase price.

Conclusion

The calculation of discount points involves determining a percentage of the loan amount. In this case, $9,300 represents the correct value for 3 discount points on the loan after the down payment. Understanding how discount points work is essential for buyers to accurately gauge their closing costs and overall loan expenses.

A buyer is obtaining a $310,000 loan at 5% interest with a 20% down payment on a $387,500 purchase price. The lender is charging 3 discount points. Calculate the discount points due at closing

$9,300 is the amount due for discount points at closing.

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