David Saks: Real Estate Practice : Lesson 3836

David Saks - Real Estate Broker - The Real Estate Mart of Tennessee, Inc. - 4040 North Watkins-Suite #4 - Memphis, Tennessee 38127 - Phone (901) 357-4663

Real Estate Practice : Lesson 3836


There was an FHA commitment on a duplex that was conditional because the duplex is not going to be occupied by the owners. The cost of the property is $247,500. At closing the loan the mortgage broker is going to receive a 4% discount of the total loan, (if still allowed under currect law).

The breakdown of the FHA rates are as follows:

97% of the first $150,000

90% of the next $50,000

75% of the balance, not to exceed $275,000

Since the owner's not going to live on the property, he can borrow 85%, which he could borrow if he did occupy the property.

What is the discount amount that the broker will receive, in dollars and cents ?

The answers, along with the corresponding solution, will be posted below the photographs at the bottom of the page, so spend a little time on it before you make your way to the bottom. Good luck, and I hope you can improve your math skills with these little quizzes.



A. $7688.25

First, let's multiply $150,000 BY 97% OR .97 to get the first amount of $145,500 which is the insured value for the first $150,000.

Now, let's multiply $50,000 times 90% or .90 to get the second amount of  $45,000, which is the insured value for the next $50,000.

Now, we subtract 200 thousand dollars (150k plus 50k) from $247,500 which leaves us with a balance total of $47,500.

Since the BALANCE is $47,500 and 75% or .75 of this amount is $35,625 we proceed with:

If occupied, the insurable amount is $145,500 plus $45,000 plus $35,625 which equals $226,125.

If unoccupied, the insurable amount is $226,125 times .85 or 85% which equals $192,206.25 which is all the borrower can borrow because he's not going to live in the home.

$192,206.25 time .04 or 4% equals $7688.25, which is the discount for closing the loan, since the borrower is borrowing at the level he would receive since he's not going to occupy the home.

Wasn't that easy ?

David Saks

Time&Temp Memphis

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Comment balloon 0 commentsDavid Saks • December 01 2014 03:31AM


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