Which item changes based on the loan amount percentage?

Which item changes based on the loan amount percentage?

• A. Origination Fees
• B. Discount Points
• C. Title Insurance Premiums
• D. Transfer Taxes

Answer: (B)

Discount points are prepaid interest expressed as a percentage of the loan amount, so the actual dollar cost changes in direct proportion to how large the loan is. If you pay the same number of points on a bigger loan, you’re paying more money at closing; on a smaller loan, you’re paying less. That proportional relationship to the loan amount is why this item changes based on the loan amount percentage. Other costs are tied to different factors: title insurance premiums depend on property value or policy type, transfer taxes depend on local rules and sale price, and origination fees are charges for processing the loan but don’t vary with the loan amount in the same percentage-based way as discount points.

Discount points are prepaid interest expressed as a percentage of the loan amount, so the actual dollar cost changes in direct proportion to how large the loan is. If you pay the same number of points on a bigger loan, you’re paying more money at closing; on a smaller loan, you’re paying less. That proportional relationship to the loan amount is why this item changes based on the loan amount percentage. Other costs are tied to different factors: title insurance premiums depend on property value or policy type, transfer taxes depend on local rules and sale price, and origination fees are charges for processing the loan but don’t vary with the loan amount in the same percentage-based way as discount points.