Michigan Real Estate Exam Practice Question
A building was purchased for $350,000 with a 20% down payment. If the lender charges the buyer three discount points, how much will the buyer pay in points?
Correct Answer: C
Rationale: To determine the cost of the discount points, first find the loan amount after the down payment. A 20% down payment on a $350,000 building is $70,000, leaving a loan amount of $280,000. Discount points are typically calculated as a percentage of the loan amount; in this case, three points equal 3% of $280,000.
Calculating 3% of $280,000 gives $8,400.
Option A ($6,160) incorrectly calculates the points based on a smaller loan amount. Option B ($7,000) miscalculates the percentage. Option D ($10,500) overestimates the points by applying an incorrect rate. Thus, $8,400 is the accurate total for the discount points.
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