Question

The price of a home is 240,000. The bank requires a 20% down payment and two points at the time of closing. The cost of the home is financed with a 30 year fixed rate mortgage at 7%. Find the amount of the mortgage. How much must be paid for the two points at closing?

Answer 1

The mortgage amount for the home is $192,000 after a 20% down payment on a $240,000 purchase price. The cost for two points at closing is $3,840, which is 2% of the mortgage amount.

Step-by-step explanation:

The amount of the mortgage can be found by subtracting the 20% down payment from the purchase price of the home. For a home priced at $240,000, a 20% down payment is $48,000 ($240,000 × 0.20), leaving a mortgage amount of $192,000 ($240,000 - $48,000).

Next, the cost of the two points at closing is calculated based on the mortgage amount. Each point costs 1% of the mortgage amount, so two points would be 2% of $192,000, which comes to $3,840

Answer 2

The price of a home is $131,000. The bank requires a 20% down payment and three points at the time of closing. The cost of the home is financed with a 30 year fixed rate mortgage at 7%