The buyer has agreed to pay $$ \$ 175,000 $$ in sales price, 2.5 loan discount points and a 1 percent origination fee. If the buyer receives a 90 percent loan-to-value ratio, how much will the buyer owe at closing for points and the origination fee?

Question

UpStudy AI · Accepted Answer

To determine how much the buyer will owe at closing for points and the origination fee, we need to break down each component based on the loan amount.

### 1. **Calculate the Loan Amount**
The **Loan-to-Value (LTV)** ratio is 90%, which means the loan amount is 90% of the sales price.

$$
\text{Loan Amount} = \text{Sales Price} \times \text{LTV} = \$175,000 \times 0.90 = \$157,500
$$

### 2. **Calculate Loan Discount Points**
**Loan discount points** are typically a percentage of the loan amount. Here, the buyer is paying **2.5 discount points**.

$$
\text{Points Cost} = \text{Loan Amount} \times \left(\frac{\text{Points}}{100}\right) = \$157,500 \times 0.025 = \$3,937.50
$$

### 3. **Calculate Origination Fee**
The **origination fee** is **1%** of the loan amount.

$$
\text{Origination Fee} = \text{Loan Amount} \times \left(\frac{\text{Origination Fee \%}}{100}\right) = \$157,500 \times 0.01 = \$1,575
$$

### 4. **Total Amount Owed at Closing for Points and Origination Fee**
$$
\text{Total Cost} = \text{Points Cost} + \text{Origination Fee} = \$3,937.50 + \$1,575 = \$5,512.50
$$

**Therefore, the buyer will owe a total of \$5,512.50 at closing for the points and the origination fee.**
The buyer will owe a total of \$5,512.50 at closing for the points and the origination fee.

The buyer has agreed to pay in
sales price, 2.5 loan discount points and a
1 percent origination fee. If the buyer
receives a 90 percent loan-to-value ratio,
how much will the buyer owe at closing
for points and the origination fee?

Upstudy AI Solution

Answer

Solution

Extra Insights

Related Questions

Latest Economics Questions

The buyer has agreed to pay in sales price, 2.5 loan discount points and a 1 percent origination fee. If the buyer receives a 90 percent loan-to-value ratio, how much will the buyer owe at closing for points and the origination fee?