Title: Explain discount points.
Course: Real Estate (12154) > Section: Exploring Real Estate Financing

Explanation should state that the number of points charged depends on

- the difference between the loan’s stated interest rate and the yield required by the lender
- how long the lender expects it will take the borrower to pay off the loan.

DPOR correlations: 18VAC135-20-400. 6 (Mortgages and deeds of trust); 18VAC135-20-400. 7 (Types of mortgages); 18VAC135-20-400. 14 (Real estate financing)

Process/Skill Questions:

- Why do lenders use discount points?
- How can a buyer “buy down” his/her interest rate on a mortgage?
- Under what circumstances would paying upfront discount points be advisable for the borrower?
- How are discount points calculated?