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Apply Loan Calculations - National Real Estate Exam

  1. How much will 3 discount points cost on a $185,000 loan?
    Answer: $5,550 Discount points = Loan Amount × Points = $185,000 × 0.03 = $5,550. Choice B ($1,850) calculates 1 point instead of 3. Choice C ($3,700) calculates 2 points instead of 3. Choice D ($7,400) calculates 4 points instead of 3.
  2. What is the monthly interest payment on a $175,000 loan at 6.25% annual interest?
    Answer: $911.46 Monthly interest = ($175,000 × 0.0625) ÷ 12 = $10,937.50 ÷ 12 = $911.46. Choice B ($875) uses 6% rate instead of 6.25%. Choice C ($1,093.75) calculates annual interest instead of monthly. Choice D ($729.17) uses 5% rate instead of 6.25%.
  3. A property is valued at $400,000. If the lender requires a maximum LTV of 85%, what is the maximum loan amount?
    Answer: $340,000 Maximum loan = Property Value × Maximum LTV = $400,000 × 0.85 = $340,000. Choice B ($320,000) uses 80% LTV instead of 85%. Choice C ($360,000) uses 90% LTV instead of 85%. Choice D ($380,000) uses 95% LTV instead of 85%.
  4. On a $300,000 home with $60,000 down, the borrower pays 1 point; what is the dollar cost of the point if based on the $240,000 loan amount?
    Answer: $2,400.00 (1% of $240,000) This question tests the application of loan calculations in real estate, focusing on LTV, interest, and amortization. Understanding these calculations is crucial for evaluating real estate investments and managing financial commitments. In this scenario, key details such as the purchase price, down payment, and interest rate guide the calculations for point cost. The correct choice accurately reflects the calculated LTV ratio or payment amount, demonstrating the student's ability to apply formulas correctly. A common distractor may base points on purchase price. To aid understanding, students should practice using standard formulas for LTV and amortization, and verify calculations with real-world examples. Encourage the use of financial calculators for accuracy.
  5. A buyer is purchasing a home for $350,000 and making a down payment of $70,000. What is the loan-to-value ratio (LTV)?
    Answer: 80% LTV = Loan Amount ÷ Property Value. The loan amount is $350,000 - $70,000 = $280,000. LTV = $280,000 ÷ $350,000 = 0.80 or 80%. Choice B (75%) uses incorrect calculation. Choice C (85%) reverses the down payment percentage. Choice D (20%) confuses LTV with down payment percentage.
  6. An investor's loan has a principal balance of $180,000 at 5.25% annual interest. What is the monthly interest payment for the first month?
    Answer: $787.50 represents the monthly interest portion only Monthly interest = ($180,000 × 0.0525) ÷ 12 = $9,450 ÷ 12 = $787.50. This is interest only, not the total payment which would include principal reduction.
  7. An investor purchases a property for $500,000 with a 75% LTV loan at 5.75% interest. If the monthly payment is $2,187, what portion represents interest in the first payment?
    Answer: $1,796.88, with remainder to principal Loan amount = $500,000 × 0.75 = $375,000. Monthly interest = ($375,000 × 0.0575) ÷ 12 = $1,796.88. The remainder ($2,187 - $1,796.88 = $390.13) goes to principal.
  8. An investment property valued at $680,000 has a current loan balance of $408,000. If the owner refinances at 70% LTV, what additional cash will be available?
    Answer: $68,000 New loan = $680,000 × 0.70 = $476,000. Additional cash = $476,000 - $408,000 = $68,000 available after paying off the existing loan balance.
  9. A property is purchased for $365,000 with a $292,000 loan. What is the loan-to-value ratio?
    Answer: 80% LTV = $292,000 ÷ $365,000 = 0.80 or 80%. Choice B (75%) uses incorrect calculation method. Choice C (85%) applies wrong percentage calculation. Choice D (20%) represents down payment percentage, not LTV.
  10. A borrower pays $8,750 for 2.5 discount points. What was the original loan amount if each point equals 1% of the loan?
    Answer: $350,000 If 2.5 points cost $8,750, then loan amount = $8,750 ÷ 0.025 = $350,000. The points represent 2.5% of the total loan amount.
  11. A loan has a balance of $135,000 and an annual interest rate of 4.25%. What is the monthly interest payment?
    Answer: $478.13 Monthly interest = ($135,000 × 0.0425) ÷ 12 = $5,737.50 ÷ 12 = $478.13. Choice B ($450) uses 4% rate instead of 4.25%. Choice C ($562.50) uses 5% rate instead of 4.25%. Choice D ($337.50) uses 3% rate instead of 4.25%.
  12. A borrower has a $200,000 loan at 5% annual interest. What is the monthly interest payment for the first month?
    Answer: $833.33 Monthly interest = (Principal × Annual Rate) ÷ 12 = ($200,000 × 0.05) ÷ 12 = $10,000 ÷ 12 = $833.33. Choice B ($1,000) uses 6% rate instead of 5%. Choice C ($10,000) calculates annual interest instead of monthly. Choice D ($416.67) uses 2.5% rate instead of 5%.
  13. A loan balance is $150,000 at 5.25% annual interest. What is the interest payment for the first month?
    Answer: $656.25 Monthly interest = (Principal × Annual Rate) ÷ 12 = ($150,000 × 0.0525) ÷ 12 = $7,875 ÷ 12 = $656.25. Choice B ($625) uses 5% rate instead of 5.25%. Choice C ($750) uses 6% rate instead of 5.25%. Choice D ($787.50) uses 6.3% rate instead of 5.25%.
  14. A borrower pays 2 discount points on a $250,000 loan. How much does the borrower pay for the discount points?
    Answer: $5,000 Each discount point equals 1% of the loan amount. 2 points = 2% × $250,000 = $5,000. Choice B ($2,500) calculates only 1 point instead of 2. Choice C ($7,500) calculates 3 points instead of 2. Choice D ($1,250) calculates 0.5 points instead of 2.
  15. If a borrower obtains a $300,000 loan at 6% annual interest, what is the monthly interest payment?
    Answer: $1,500 Monthly interest = (Principal × Annual Rate) ÷ 12 = ($300,000 × 0.06) ÷ 12 = $18,000 ÷ 12 = $1,500. Choice B ($1,800) uses 7.2% rate instead of 6%. Choice C ($1,200) uses 4.8% rate instead of 6%. Choice D ($1,000) uses 4% rate instead of 6%.
  16. A lender charges 2.25 discount points on a $425,000 loan, with each point reducing the rate by 0.1875%. If the base rate is 6.75%, what is the borrower's total upfront point cost?
    Answer: $9,562.50 Point cost = $425,000 × 0.0225 = $9,562.50. New rate = 6.75% - (2.25 × 0.1875%) = 6.328%.
  17. A borrower is considering paying 3 discount points on a $380,000 loan. If each point costs 1% of the loan amount and reduces the rate by 0.20%, what is the total cost and rate reduction?
    Answer: Total cost $11,400 with rate reduction of 0.60% from original rate Total cost = $380,000 × 0.03 = $11,400. Rate reduction = 3 points × 0.20% per point = 0.60% total reduction from the original interest rate.
  18. What is the cost of 1.75 discount points on a $268,000 loan?
    Answer: $4,690 Points cost = $268,000 × 0.0175 = $4,690. Choice B ($2,680) calculates 1 point instead of 1.75. Choice C ($5,360) calculates 2 points instead of 1.75. Choice D ($1,340) calculates 0.5 points instead of 1.75.
  19. A property valued at $350,000 has an existing loan balance of $245,000. If the borrower wants to refinance at 80% LTV, what is the maximum cash available at closing?
    Answer: $35,000 cash available after paying off existing loan balance New loan amount = $350,000 × 0.80 = $280,000. Cash available = $280,000 - $245,000 existing loan = $35,000 after paying off the current mortgage.
  20. A lender requires a borrower to have no more than a 95% LTV ratio. If the property appraises for $285,000 and the borrower has $20,000 for a down payment, what is the maximum loan amount available?
    Answer: Maximum loan of $270,750 based on lender's LTV requirement Maximum loan = $285,000 × 0.95 = $270,750. The LTV requirement limits the loan to 95% of appraised value, regardless of the borrower's available down payment amount.

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