New Jersey Real Estate Exam Practice Question
A property sold for $160,000. The loan-to-value ratio was 80% and there were 2 discount points charged. Which of the following was the cost of the discount points?
Correct Answer: C
Rationale: To determine the cost of the discount points, first calculate the loan amount. With a sale price of $160,000 and a loan-to-value ratio of 80%, the loan amount is $160,000 x 0.80 = $128,000. Discount points are typically 1% of the loan amount. Therefore, 2 discount points would cost 2% of $128,000, which equals $128,000 x 0.02 = $2,560.
Evaluating the options:
- A: $600 is too low and does not reflect any percentage of the loan.
- B: $1,500 is also insufficient as it is less than 2% of the loan.
- D: $3,000 exceeds the calculated cost, making it incorrect.
Thus, the accurate calculation leads to $2,560, confirming option C as the closest correct interpretation of the discount points cost.
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