If a buyer requests discount points to below-market interest rate, which statement describes this arrangement?

If a buyer requests discount points to below-market interest rate, which statement describes this arrangement?

• A. Discount points must be paid solely by the buyer.
• B. Points increase the loan amount.
• C. Points can be charged to either the buyer or the seller.
• D. Points have no impact on rate.

Answer: (C)

Discount points are prepaid interest paid to a lender to secure a lower mortgage rate. Who pays those points is not fixed; they can be paid by the buyer, by the seller as a concession, or split between them. That negotiability is why the statement that points can be charged to either the buyer or the seller best describes the arrangement. Remember, paying points changes the rate you receive (lower rate with points) and—if you finance the points—can increase the loan amount, affecting overall costs.

Discount points are prepaid interest paid to a lender to secure a lower mortgage rate. Who pays those points is not fixed; they can be paid by the buyer, by the seller as a concession, or split between them. That negotiability is why the statement that points can be charged to either the buyer or the seller best describes the arrangement. Remember, paying points changes the rate you receive (lower rate with points) and—if you finance the points—can increase the loan amount, affecting overall costs.