Final answer:
Buyer Carr is obtaining an FHA loan with lower interest rates by paying for 3 discount points, which makes the loan cheaper upfront in exchange for a reduced rate. Federal regulation changes can lower interest rates and make loans more accessible, but loans with low down payments often require mortgage insurance.
Step-by-step explanation:
Buyer Carr's decision to get an FHA loan is influenced by the lower interest rates it offers compared to conventional loans. Discount points, in this context, are upfront fees paid at closing to reduce the interest rate on the mortgage loan. Each point is equivalent to 1% of the loan amount. By paying for 3 discount points, Buyer Carr is paying 3% of the loan value upfront to secure a lower interest rate, which is beneficial given that the rates are currently below the market rates.
When the federal government modifies bank regulations to make home loans more affordable and accessible, it often results in a decrease in interest rates. This is due to the reduction in demand and increased competition among lenders. While lower down payments, like 0-3.5%, can expand home-buying opportunities, they also typically require mortgage insurance, which can increase the overall cost of the loan.