Tennessee Realtor State Practice Exam

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Prepare for the Tennessee Realtor State Exam with questions and explanations designed to help you succeed. Master the principles and regulations of real estate in Tennessee. Ace your exam with confidence!

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If the purchase price of a home is $300,000 and the buyer puts $100,000 down while paying three discount points, how much will the discount points cost?

$3,000
$6,000
$4,500
$9,000

The correct answer is: $6,000

To determine the cost of the discount points in this scenario, it's important to understand what discount points are. Discount points are fees paid to lower the interest rate on a mortgage. Each discount point typically costs 1% of the total loan amount. In this case, the total purchase price of the home is $300,000, and the buyer is making a down payment of $100,000. This means the loan amount, which is the amount subject to discount points, will be the purchase price minus the down payment. Therefore, the loan amount is $300,000 - $100,000 = $200,000. Since the buyer is paying three discount points, we calculate the cost of those points as follows: 1. Each point costs 1% of the loan amount. 2. 1% of $200,000 equals $2,000. 3. Therefore, three points would be 3 * $2,000, which totals $6,000. Thus, the cost of the discount points comes out to $6,000, corroborating the choice that states this amount.