81. A buyer is planning to purchase a house that costs $120,000. If the buyer obtains an 85% loan and the lender charges a 1.5% loan origination fee and 1.5 discount points, what is the cost of these expenses
Answer: C
The total cost of the expenses is $3,060.
To calculate the total cost of the expenses related to the loan, we need to consider both the loan origination fee and the discount points. The loan amount is 85% of $120,000, which is $102,000. The origination fee is 1.5% of this loan amount, and the discount points are also 1.5% of the loan amount.
A) $1,800
Option A is incorrect because it likely only accounts for one of the costs without properly calculating both the origination fee and discount points. The calculations clearly show that the total expenses exceed this amount.
B) $2,550
Option B is also incorrect as it underestimates the total costs. This figure may represent only one of the expenses or an incomplete calculation of both the origination fee and discount points.
C) $3,060
Option C is correct as it accurately reflects the total expenses. The loan origination fee is 1.5% of $102,000, which equals $1,530, and the discount points are also 1.5% of $102,000, which is another $1,530. Adding these together gives $1,530 + $1,530 = $3,060.
D) $3,600
Option D is incorrect as it overestimates the total costs. This amount does not align with the calculated fees for the loan origination and discount points based on the provided percentages.
Conclusion
The calculation for the total expenses related to the loan clearly shows that the correct answer is $3,060, which includes both the origination fee and discount points. Options A, B, and D fail to accurately reflect the necessary calculations, demonstrating misunderstanding in the application of the percentages to the loan amount.