How many basis points are equal to one discount point?

How many basis points are equal to one discount point?

• A. 50/1
• B. 100/1
• C. 75/1
• D. 200/1

Answer: (B)

One discount point is equal to 100 basis points. This is an essential concept in the mortgage industry, as it relates to the cost of borrowing. A basis point is one-hundredth of a percentage point (0.01%), so when it comes to pricing loans, one discount point, which is typically equal to 1% of the loan amount, is quantified as 100 basis points. Understanding this relationship is crucial for loan officers, as it impacts how borrowers comprehend costs associated with their loans. For example, if a loan has a cost of two discount points, it would translate to 200 basis points, directly affecting the overall cost of the mortgage. This knowledge enables mortgage professionals to explain potential loan costs and fees to clients clearly and effectively.

One discount point is equal to 100 basis points. This is an essential concept in the mortgage industry, as it relates to the cost of borrowing. A basis point is one-hundredth of a percentage point (0.01%), so when it comes to pricing loans, one discount point, which is typically equal to 1% of the loan amount, is quantified as 100 basis points.

Understanding this relationship is crucial for loan officers, as it impacts how borrowers comprehend costs associated with their loans. For example, if a loan has a cost of two discount points, it would translate to 200 basis points, directly affecting the overall cost of the mortgage. This knowledge enables mortgage professionals to explain potential loan costs and fees to clients clearly and effectively.