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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In real estate financing, how is a point defined?

1% of the loan amount
2% of the purchase price
Fixed percentage of the interest rate
3% of the monthly payment

The correct answer is: 1% of the loan amount

In real estate financing, a point is defined as 1% of the loan amount. This means that if you have a loan of $100,000, one point would equal $1,000. Points are typically used in relation to origination fees or discount points that a borrower may pay at closing. Paying points can lower the interest rate on a loan, which can lead to significant savings over the life of the mortgage. This definition is essential for understanding various loan structures and how they can affect the overall cost of borrowing. The other options provided do not accurately represent the standard definition of a point in the context of real estate financing.