Ace the Arizona Real Estate Exam 2025 – Unlock Your Property Dreams!

Question: 1 / 1505

If a borrower provides a down payment of $10,000 on a $90,000 house and pays 3 discount points, what is the total cost of the points?

$3,000

$2,700

$2,400

To determine the total cost of the points in this scenario, it’s essential to understand what discount points represent in a mortgage context. Each discount point typically equates to 1% of the loan amount. In this case, the loan amount can be calculated by subtracting the down payment from the price of the house.

First, subtract the down payment of $10,000 from the house's price of $90,000. This results in a loan amount of $80,000 ($90,000 - $10,000 = $80,000).

Next, calculate the total cost of the discount points. Since the borrower is paying 3 discount points, multiply the loan amount by the percentage represented by the points:

3% of $80,000 equals $2,400 ($80,000 x 0.03 = $2,400).

Understanding this calculation confirms that the total cost of the points is indeed $2,400. This method not only adds accurate financial insight to the transaction but also allows borrowers to recognize the upfront costs associated with obtaining a mortgage by way of discount points.

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$2,000

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