How much are clients paying in points if they purchase a $160,000 home with a 25% down payment and the bank charges two points at closing?

To determine how much the clients are paying in points for their mortgage, we first need to understand what "points" are in the context of a home loan. Points are typically expressed as a percentage of the loan amount, with one point equating to 1% of the loan.

In this scenario, the clients are purchasing a $160,000 home with a 25% down payment. The down payment can be calculated as follows:

[

\text{Down payment} = \text{Home Price} \times \text{Down Payment Percentage} = 160,000 \times 0.25 = 40,000

]

This means the loan amount after the down payment is:

[

\text{Loan Amount} = \text{Home Price} - \text{Down Payment} = 160,000 - 40,000 = 120,000

]

The bank charges two points at closing. Since one point is 1% of the loan amount, two points would be 2% of the loan amount. The calculation for two points would be:

[

\text{Points} = \text{Loan Amount} \times 2% = 120,000 \times