Use PMT = $\frac{\text { to determine the regular payment amount, rounded to the nearest dollar. The price of a home is } $174,000 \text {. The }}{[-nt]}$ requires a 20% down payment and three points at the time of closing. The cost of the home is financed with a 30-year fixed-rate mortgage at 1 Complete parts (a).through (e) below.
a. Find the required down payment.
$ 34800
b. Find the amount of the mortgage.
$ 139,200
c. How much must be paid for the three points at closing?
$ $\square$ (Round to the nearest dollar as needed.)
Answer (2)
Calculate 3% of the mortgage amount: 0.03 × 139200 = 4176 .
The cost for three points at closing is $\boxed{ 4176} .
Explanation
Understanding the Problem We are asked to find the amount paid for three points at closing, given that the mortgage amount is $139,200. One point is equal to 1% of the mortgage amount. Therefore, three points are equal to 3% of the mortgage amount.
Calculating the Cost of Points To calculate the cost of three points, we need to find 3% of $139,200. This can be done by multiplying the mortgage amount by 0.03.
Performing the Calculation Cost of three points = 0.03 * $139,200 = $4176.
Final Answer Therefore, the amount paid for the three points at closing is $4176.
Examples
When purchasing a home, understanding points is crucial. Each point equals 1% of the mortgage. For instance, paying two points on a $200,000 mortgage means you're paying an extra $4,000 upfront. This payment reduces your interest rate, potentially saving money over the loan's life. Calculating these costs helps you make informed decisions about upfront expenses versus long-term savings.
The cost for three points at closing is calculated to be $4,176 by taking 3% of the mortgage amount of $139,200. Points are prepaid interest fees that lenders charge. Therefore, three points equal $4,176 at the time of closing.
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