A house sold for $45,000. A VA loan for $37,000 was obtained with 4 points. How much are points at closing?

Rationale

$1,480 would be charged for points at closing.

When a loan is obtained with points, each point represents 1% of the loan amount. In this case, 4 points on a VA loan of $37,000 amounts to $1,480, calculated as 4% of the loan value.

A ($925) YOUR ANSWER

This amount represents 2.5 points on a loan of $37,000, which is incorrect. The calculation for points is based on the total loan amount, and 2.5 points would be 2.5% of $37,000, yielding $925. This does not reflect the 4 points charged in the question.

B ($1,480) CORRECT

This is the correct calculation. Four points represent 4% of the $37,000 loan, which is calculated as $37,000 x 0.04 = $1,480. This accurately reflects the cost of points at closing for the VA loan.

C ($1,800) YOUR ANSWER

This figure suggests a higher percentage than the actual 4 points charged on the loan. Specifically, it would be approximately 4.86% of the loan amount, which does not align with the 4 points discussed. Therefore, it is an incorrect calculation for points.

D ($3,200) YOUR ANSWER

This amount represents about 8.65 points on the loan, which is far more than the 4 points charged. This calculation does not correspond to the terms of the loan and is thus incorrect.

Conclusion

The calculation for points at closing is straightforward: it is based on the percentage of the loan amount. For a VA loan of $37,000 with 4 points charged, the total cost comes to $1,480, making option B the correct answer. Understanding how points are calculated is essential for accurately assessing closing costs associated with loans.

A house sold for $45,000. A VA loan for $37,000 was obtained with 4 points. How much are points at closing?

$1,480 would be charged for points at closing.

Related Questions

Related Quizzes

How familiar were you with this question?

Report an Issue

Rate this Practice Test