Affiliate Broker Tennessee (TN PSI) National Practice Exam `

A buyer is purchasing a property for $400,000 with an 80% loan-to-value ratio. If the lender charges a 1% loan origination fee, how much is the fee?

1. $3,200

2. $4,000

3. $2,800

4. $3,500

The correct answer is: $3,200

To determine the loan origination fee, one first needs to calculate the amount of the loan based on the purchase price and the loan-to-value ratio. In this case, the buyer is purchasing a property for $400,000 and has an 80% loan-to-value ratio. This means that the loan amount will be 80% of the purchase price. Calculating 80% of $400,000 gives us: \[ Loan Amount = Purchase Price \times Loan-to-Value Ratio \] \[ Loan Amount = 400,000 \times 0.80 = 320,000 \] Next, the loan origination fee is typically a percentage of the loan amount. Here, the lender charges a 1% origination fee. Therefore, to calculate the fee, you would take 1% of the loan amount: \[ Loan Origination Fee = Loan Amount \times Origination Fee Percentage \] \[ Loan Origination Fee = 320,000 \times 0.01 = 3,200 \] This calculated amount, $3,200, represents the loan origination fee that the buyer would need to pay. Hence, the answer is accurate based on the calculations of the