New Jersey Real Estate License Exam Practice Question
Buyers write an offer for $325,000 with 20% down payment, which is accepted. They must pay 1.5 discount points to obtain financing. What amount will they owe for points?
Correct Answer: C
Rationale: To determine the amount owed for points, first calculate the loan amount. With a purchase price of $325,000 and a 20% down payment, the down payment is $65,000 (20% of $325,000). Thus, the loan amount is $260,000 ($325,000 - $65,000).
Next, calculate the cost of the discount points. One point equals 1% of the loan amount. Therefore, 1.5 points equals 1.5% of $260,000.
Calculating this gives:
1.5% of $260,000 = 0.015 * $260,000 = $3,900.
Option A ($3,250) is incorrect as it represents 1% of the purchase price, not the loan amount.
Option B ($3,900) is misleading as it suggests the cost of 1.5 points but does not reflect the correct calculation.
Option D ($5,200) incorrectly assumes a higher percentage applied to the loan amount.
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