Question

On the purchase of a home, one "point" is equal to

A) $100.
B) $1,000.
C) 1% of the amount being financed.
D) 1% of the purchase price.

Answer 1

In the context of home mortgage, one point is equivalent to 1% of the amount being financed.

Step-by-step explanation:

On the purchase of a home, one "point" is equal to C) 1% of the amount being financed.

This means that for every point you agree to pay upfront, you're essentially paying 1% of the total loan amount, which reduces the amount of interest rate on the mortgage.

For example, if you are financing $100,000 and the lender charges 1 point, you would pay $1,000.

The idea is similar to a down payment, but it's specifically for paying part of the loan interest upfront rather than directly towards the principal of the house's price.