The purpose of discount points is:

Discount points are a form of prepaid interest that a borrower can choose to pay upfront at closing. Each point typically costs 1% of the total loan amount. In exchange for this payment, the lender reduces the interest rate on the loan, known as "buying down the rate." This results in a lower monthly mortgage payment and less total interest paid over the life of the loan. The decision to pay points involves a break-even analysis to determine if the upfront cost is justified by the long-term savings.

B. to lower the property value for purposes of tax savings: Discount points are a financing cost and have no impact on the property's assessed value for real estate tax purposes.

C. to lock in an interest rate for a specified time prior to closing: This describes a "rate lock" or "rate commitment," which is a separate agreement and potential fee to guarantee a specific rate for a set period.

D. to lower the amount due at closing: Paying discount points is an additional closing cost, thereby increasing the total amount of cash the borrower must bring to closing.

1. Virginia Real Estate Board. Virginia Real Estate Manual, 2023 Edition. Chapter 11, "Real Estate Finance," Section: The Cost of Credit. This section explains that discount points are used to increase the lender's yield and effectively lower the interest rate for the borrower.

2. Consumer Financial Protection Bureau (CFPB). "What are discount points and lender credits and how do they work?" Official Publication. The CFPB, a U.S. government agency, explicitly states, "Discount points are a type of prepaid interest... that you can pay to reduce your interest rate."

3. Ling, D. C., & Archer, W. R. (2021). Real Estate Principles: A Value Approach (7th ed.). McGraw-Hill Education. Chapter 10, "Sources of Mortgage Money: The Primary and Secondary Mortgage Markets," discusses discount points as a method for borrowers to buy down their contract interest rate.