Final answer:
One point in mortgage terms equals 1% of the loan amount, which, in Mr. Charley's case, would be $800, not $1,200, because he took an $80,000 loan after a 20% down payment on a $100,000 home.
Step-by-step explanation:
The question is about calculating mortgage points when purchasing a home. When Mr. Charley purchased a home for $100,000, he put down a 20% down payment which amounts to $20,000. This means he took out a mortgage for the remaining amount which is $80,000. Mortgage points are fees paid directly to the lender at closing in exchange for a reduced interest rate. One point usually equals 1% of the mortgage amount. Therefore, if Mr. Charley was charged one point, it would be 1% of his loan amount, not the purchase price of the home.
So, 1% of $80,000 (the mortgage amount after a 20% down payment) is $800, not $1,200. Hence, the statement that the point Mr. Charley was charged totaled $1,200 is not true. It is important when considering home purchases to understand the terms and fees involved including down payments, mortgage points, and mortgage insurance.