A seller pays 2 discount points when selling a house to a buyer with an FHA mortgage loan. This money is paid to the

Rationale

The seller pays the 2 discount points to the lender.

Discount points are fees paid upfront to the lender to reduce the interest rate on a mortgage loan. In this scenario, the seller pays 2 discount points specifically to the lender as part of the financing arrangement for the buyer's FHA mortgage.

A (FHA) YOUR ANSWER

While the FHA (Federal Housing Administration) insures the mortgage, it does not directly receive the discount points. The points are paid to the lender who provides the actual loan to the buyer, making this option incorrect.

B (buyer.) YOUR ANSWER

The buyer does not receive the discount points; rather, they benefit from a lower interest rate as a result of the seller paying these points to the lender. Therefore, this choice does not accurately reflect the flow of funds in the transaction.

C (lender.) CORRECT

The lender is the correct recipient of the 2 discount points. These points are considered prepaid interest that the seller pays to reduce the buyer's mortgage interest rate, making this option the accurate answer.

D (selling licensee) YOUR ANSWER

The selling licensee, or real estate agent, does not receive the discount points in this transaction. Their compensation typically comes from a commission based on the sale price of the house, making this choice incorrect.

Conclusion

In real estate transactions involving FHA mortgages, sellers may opt to pay discount points to the lender to facilitate lower interest rates for buyers. This payment directly benefits the lender, ensuring that the correct understanding of fees and payments in mortgage financing is maintained. Recognizing that the seller’s payment of discount points serves to enhance the buyer's financing options is crucial in real estate transactions.

A seller pays 2 discount points when selling a house to a buyer with an FHA mortgage loan. This money is paid to the

The seller pays the 2 discount points to the lender.

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