Question 81

The cost of the expenses is $3,060.

To calculate the cost of the loan origination fee and discount points, first determine the loan amount, which is 85% of $120,000. This equals $102,000. The origination fee is 1.5% of this amount, resulting in $1,530. The discount points, also at 1.5%, add another $1,530, bringing the total expenses to $3,060.

A) $1,800

This option incorrectly represents the total expenses. It likely reflects only the loan origination fee calculated on a smaller amount or a miscalculation of the points. The expenses must account for both the origination fee and the discount points, which are each based on the loan amount of $102,000.

B) $2,550

This choice underestimates the total expenses. It may represent a partial sum or miscalculation of the fees involved. The total expenses must include both the origination fee and discount points, which together are significantly higher than this amount.

C) $3,060

This option accurately reflects the total cost of the expenses. The calculation includes both the 1.5% loan origination fee and the 1.5 discount points, both applied to the loan amount of $102,000, leading to a correct total of $3,060.

D) $3,600

This choice overestimates the total expenses. It suggests an incorrect calculation, possibly by applying a higher percentage or miscalculating the loan amount. The correct approach shows that the total expenses are lower than this figure when accurately calculated.

Conclusion

Option C is definitively correct, as it accurately calculates the total of both the loan origination fee and discount points based on the loan amount. Other options either underestimate or overestimate the expenses, failing to account for the correct percentages applied to the full loan amount. This ensures that understanding the breakdown of costs is crucial for accurate financial planning when purchasing a home.