Loan Origination Activities · 27% of the SAFE exameasy
Correct answer: $4,800 — calculated as 1.5% of the loan amount
Discount points are calculated as a percentage of the LOAN AMOUNT (not the purchase price or appraised value). One discount point = 1% of the loan amount. So 1.5 points on a $320,000 loan = $320,000 × 1.5% = $4,800. Each point generally reduces the interest rate by approximately 0.25%, though this varies by lender and market conditions. Points are prepaid interest and are tax-deductible in the year paid (for purchase loans) or over the life of the loan (for refinances). The key exam distinction: points are always based on the loan amount, never the purchase price or appraised value. "$3,200 — calculated as 1.5% of the purchase price" uses the wrong base (purchase price). "$3,200 — calculated as 1% of the loan amount plus a..." incorrectly splits the calculation. "$4,800 — calculated as 1.5% of the appraised value" uses appraised value, which is also wrong.
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