N.C. Real Estate Post Licensing 302 Closing Statement Calculations.
This one covers two more calculations:
1. Loan Origination Fees and
2. Loan Discount Points
These two calculations are easily confused. That's due in part because often the test problem asks for a 1% origination fee (which equals 1% of the loan amount), as well as 1 discount point (which equals 1% of the loan amount too.)
The second point of confusion is that you need the loan amount in order to calculate both of these items. And sometimes the test problem only gives you the sales price and the LTV (loan to value ratio). If that's the case, just multiply the sales price by the LTV (for example: sales price of $325,000 and the borrow is getting a 95% loan (LTV) means you multiply $325,000 by 95% to get the loan amount.
Once you have the loan amount, multiply it by the appropriate ratio for the loan origination fee. If it's a 1% origination fee, that's 1% of the loan amount.
For discount points, remember that ONE discount point equals 1% of the loan amount. If the problem is saying the lender is charging two discount points, that will be 2% of the loan amount.
Think of the Loan Origination Fee as an administrative fee and think of Loan Discount Points as up front or "prepaid" interest that the lender is charging in order to give the borrower a lower interest rate for the life of the loan.
Also, discount points can be paid by anyone. Sometimes a builder or a seller will offer to pay them in order to attract buyers to their product.
