PSI New Jersey Real Estate State Practice Exam Prep | Practice Test & Study Guide

To calculate the amount owed for points, first, it's essential to understand what discount points are. Discount points are fees paid directly to the lender at closing in exchange for a reduced interest rate. One point is equal to 1% of the loan amount.

In this scenario, the buyer is making an offer of $325,000 with a 20% down payment. First, we will determine the loan amount by calculating the down payment:

1. Calculate the down payment:

- Down payment = 20% of $325,000 = 0.20 x $325,000 = $65,000.

2. Now, we can determine the loan amount:

- Loan amount = Purchase price - Down payment = $325,000 - $65,000 = $260,000.

Next, since the buyer must pay 1 1/2 discount points, first convert that into a decimal:

- 1 1/2 points = 1.5% = 0.015.

Now, calculate the cost of the points based on the loan amount:

- Cost for points = Loan amount x Percentage of points = $260,000 x 0.015 = $3,900.

This calculation reveals that the