PMI protects the LENDER, required over 80% LTV on conventional loans
Before you read
Test yourself first: 5 questions
Question 1 of 5
A licensee wants to make telemarketing calls to prospective sellers. To comply with do-not-call rules, the licensee should FIRST:
Answer: B. Before making telemarketing calls, the caller must compare the list against the National Do-Not-Call Registry and remove registered numbers, unless an exception such as an established business relationship applies.
Question 2 of 5
The lot-and-block (recorded plat) system of legal description refers to a parcel by lot and block numbers shown on a:
Answer: B. The lot-and-block system identifies a parcel by its lot and block numbers as shown on a subdivision plat map that has been recorded in the public records.
Question 3 of 5
On a $200,000 loan, the lender charges 2 discount points. How much will the borrower pay in points at closing?
Answer: B. One point equals 1% of the loan amount. 2 points on $200,000 = 0.02 × $200,000 = $4,000.
Question 4 of 5
What is the primary effect of a borrower paying discount points to a lender?
Answer: B. Discount points are prepaid interest paid to the lender to reduce (buy down) the interest rate on the loan, lowering the borrower's monthly payment over the life of the loan.
Question 5 of 5
A buyer obtains a $300,000 loan and pays 1.5 discount points. Each point lowers the rate by 0.25%. If the par rate is 6.5%, the points cost $4,500 and the resulting rate is approximately:
Answer: B. 1.5 points × 0.25% per point = 0.375% reduction. 6.5% − 0.375% = 6.125%. (Cost check: 1.5% × $300,000 = $4,500.)
Keep the streak going with more questions like these, each with a full rationale.
Must-know rules
- 1 discount point = 1% of the LOAN amount; buys the rate down (~1/8% each, varies)
- LTV = loan ÷ price (or appraised value, whichever is LESS)
- Down payment % + LTV % = 100%
- PMI protects the LENDER, required over 80% LTV on conventional loans
- Origination fee = lender's charge to make the loan (also % of loan)
Points, LTV & PMI — The Numbers: FAQs
Is Points, LTV & PMI — The Numbers on the real estate exam?
Yes. Financing & Lending is a scored domain on the real estate licensing exam, and this topic appears in the national portion.
Is this cheat sheet free?
Yes — every page on Cinna RE's resource library is free to read, print and share. The app adds practice questions, mock exams and a readiness score.
