Question

A buyer purchased an $800,000 house with an 80% loan to value ratio. The lender charged 3 discount points to the buyer. Including the down payment, how much must the buyer pay at closing?

Answer 1

$179,200

Step-by-step explanation:

Given:

Value of the house = $800,000

Loan to value ratio = 80%

Discount points charged = 3

Thus,

the amount of down payment = 20% of the value of the house

or

the amount of down payment = 0.20 × $800,000 = $160,000

Now,

1 discount point is 1 percent of the loan amount ( 80% of the value of house)

thus,

for 3 discount points

amount charged = 3 × 0.01 × (0.8 × $800,000)

or

The amount charged as 3 discount points = $19,200

Hence,

at closing , the buyer should pay = $160,000 + $19,200 = $179,200