California Real Estate Practice Exam

Buyer A is purchasing a home for $375,000 with an 80% loan-to-value ratio. If the lender charges 2 points, how much will the borrower pay in points?

1. $6,000

2. $7,500

3. $3,000

4. $12,000

The correct answer is: $6,000

The borrower will pay $6,000 in points. This is because 2 points is equivalent to 2% of the total loan amount, which in this case is $375,000. So 2% of $375,000 is $7,500. However, since the loan-to-value ratio is 80%, the lender will only loan 80% of the total value of the home, which is $375,000. Therefore, the borrower will only be charged 2% of $300,000 (80% of $375,000), resulting in a total of $6,000 in points. Option B is incorrect because it uses the incorrect loan-to-value ratio of 90% instead of 80%, resulting in a higher amount of points charged. Option C is also incorrect because it uses the incorrect loan amount of $400,000 instead of $375,