Where this fits on the exam
| Official syllabus topic | XI.B.4 General Concepts: Discount points and loan origination fees |
|---|---|
| Official PSI area | Real Estate Calculations |
| Published weight | 7% of the national portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes a weight for the complete official area, not a guaranteed count for this individual calculation. Follow the stated facts, units, time basis, and rounding instruction.
Formula and variables
| Symbol or term | Meaning |
|---|---|
| Loan amount | The amount financed and the percentage base for points |
| Points | Each point equals 1% of the loan amount, including fractional points |
| Origination percentage | The stated lender fee percentage applied to the loan amount |
Step-by-step method
- Identify the loan amount and ignore the sale price unless it is needed first to find the loan.
- Convert points or the origination percentage to a decimal.
- Multiply the loan amount by that decimal.
- Keep discount points and origination fees as separate line items if both are charged.
- Do not infer a fixed interest-rate reduction per point because the question or lender must state it.
Georgia-specific distinction
Worked examples
Example 1: Fractional discount points
Scenario. A borrower pays 1.25 discount points on a $288,000 loan.
- 1.25 points = 1.25% = 0.0125.
- $288,000 x 0.0125 = $3,600.
Answer. The discount points cost $3,600.
Reasonableness check. One point is $2,880 and one-quarter point is $720, totaling $3,600.
Example 2: Points plus origination
Scenario. A $240,000 loan charges 0.5 discount point and a 1% origination fee.
- Discount point cost = $240,000 x 0.005 = $1,200.
- Origination fee = $240,000 x 0.01 = $2,400.
- Combined stated charges = $3,600.
Answer. The two charges total $3,600.
Reasonableness check. The percentages total 1.5% of the loan, and 1.5% of $240,000 is $3,600.
Common exam traps
- Taking the percentage of the sale price instead of the loan
- Treating 1.5 points as 15%
- Assuming one point always lowers the interest rate by a fixed amount
- Combining an origination fee with discount points before identifying what each charge means
Original practice questions with detailed explanations
These original instructional questions map to the July 1, 2026 PSI outline. They are not copied from PSI or any live examination. Write the setup before opening the explanation.
Question 1A buyer purchases a home for $400,000 with an 80% loan and pays 1.5 discount points. What do the points cost?
- A. $480
- B. $4,800
- C. $6,000
- D. $48,000
Show answer and explanation →
Answer: B. $4,800
The loan is $320,000, and 1.5% of $320,000 is $4,800. $6,000 takes the points from the sale price, but points are always a percentage of the loan. $48,000 treats 1.5 points as 15%.
- A. Incorrect. $480 uses 0.15% of the loan rather than the stated 1.5%.
- B. Correct. The loan is $320,000, and 1.5% of that amount is $4,800.
- C. Incorrect. $6,000 applies points to the $400,000 purchase price instead of the loan.
- D. Incorrect. $48,000 uses 15% of the loan, ten times the stated point charge.
Question 2A $350,000 loan carries 0.75 discount point and a 1% origination fee. What is the total of the two charges?
- A. $2,625
- B. $3,500
- C. $6,125
- D. $29,750
Show answer and explanation →
Answer: C. $6,125
Discount points are $350,000 x 0.0075 = $2,625 and origination is $350,000 x 0.01 = $3,500, for $6,125. $3,500 counts only the origination fee. $29,750 reads 0.75 point as 7.5%.
- A. Incorrect. $2,625 covers only the 0.75 discount point and omits origination.
- B. Incorrect. $3,500 covers only the 1% origination fee and omits discount points.
- C. Correct. $2,625 points plus $3,500 origination equals $6,125.
- D. Incorrect. $29,750 treats 0.75 point as 7.5%, then adds the 1% origination fee.
Question 3A home sells for $300,000 with a $270,000 loan. The borrower pays $5,400 for discount points. How many points were paid?
- A. 0.02 point
- B. 1.8 points
- C. 2 points
- D. 20 points
Show answer and explanation →
Answer: C. 2 points
Points are measured on the loan: $5,400 / $270,000 = 0.02, which is 2%, or 2 points. 1.8 points divides by the sale price instead of the loan. 0.02 point forgets to convert the decimal into percentage points.
- A. Incorrect. 0.02 is the decimal ratio; multiply by 100 to express the number of points.
- B. Incorrect. 1.8 divides $5,400 by the $300,000 price instead of the loan.
- C. Correct. $5,400 divided by $270,000 is 2%, and each point is 1% of the loan.
- D. Incorrect. 20 points would cost $54,000 on this loan, ten times the actual charge.
Ready to move on?
You have this calculation down when all of these are true.
- I use loan amount as the percentage base.
- I convert fractional points to percentages and decimals.
- I calculate points and origination fees separately.
- I do not claim a fixed rate reduction per point.
- I can add multiple loan charges without mixing their purposes.
Recommended next lesson
Continue with Equity Calculations. Points are figured on the loan amount, and the next lesson uses the loan's current balance, plus any second lien, to measure the owner's stake in today's value.
Return to the complete calculation hub, formula sheet, or mixed math drill.