What is prepaid interest in the context of purchasing a home?
8.4A Purchasing a Home Worksheet

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Mathematics
•
12th Grade
•
Hard
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1.
FLASHCARD QUESTION
Front
Back
Prepaid interest is the interest that a borrower pays in advance for the period between the closing date and the end of the month. It is calculated based on the loan amount and the interest rate.
2.
FLASHCARD QUESTION
Front
How do you calculate the amount of prepaid interest?
Back
To calculate prepaid interest, use the formula: (Loan Amount x Interest Rate x Number of Days until Month End) / 360.
3.
FLASHCARD QUESTION
Front
What is the significance of the down payment when purchasing a home?
Back
The down payment is the initial amount paid upfront when purchasing a home, which reduces the loan amount and can affect mortgage terms and monthly payments.
4.
FLASHCARD QUESTION
Front
What is the typical range of closing costs when buying a home?
Back
Closing costs typically range from 2% to 5% of the home's purchase price, including fees for services like appraisal, title insurance, and attorney fees.
5.
FLASHCARD QUESTION
Front
What factors can influence the closing costs of a home purchase?
Back
Factors include the home's purchase price, location, type of loan, and specific lender fees.
6.
FLASHCARD QUESTION
Front
What does a mortgage interest rate represent?
Back
A mortgage interest rate is the cost of borrowing money expressed as a percentage of the loan amount, which determines the monthly payment amount.
7.
FLASHCARD QUESTION
Front
How is the loan amount determined after a down payment?
Back
The loan amount is determined by subtracting the down payment from the purchase price of the home.
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