Florida Real Estate Sales Associate Examination Content OutlineReal Estate FinanceMedium
A buyer is obtaining a loan for $200,000. The lender charges a 1% origination fee and 2 discount points. What is the total cost of these fees to the buyer at closing?
- A$4,000
- B$8,000
- C$6,000
- D$2,000
Show answer & explanationAnswer & explanation
Correct answer: C. $6,000
A 1% origination fee on $200,000 is $200,000 * 0.01 = $2,000. Two discount points mean 2% of the loan amount, which is $200,000 * 0.02 = $4,000. The total cost is $2,000 + $4,000 = $6,000.
Why the other options are wrong
- A. This only accounts for the discount points.
- B. This would be 4% of the loan amount.
- D. This only accounts for the origination fee.
Loan Origination Fee
A fee charged by a lender for processing a loan application, typically expressed as a percentage of the loan amount.
- Covers administrative costs
- Paid at closing
- Usually 0.5% to 1.5% of the loan amount
Memory trick: Fees: 'F' for 'Final' costs.