39. A buyer wants to purchase a home for $150,000 with a 15% down payment. The lender charges 1.75 points. How much money does the buyer need up front to make the purchase?
Answer: D
The buyer needs $24,731 up front to make the purchase.
To calculate the upfront amount required for the home purchase, the buyer must consider both the down payment and the points charged by the lender. The total upfront cost includes the 15% down payment of the home price and the 1.75 points on the loan amount.
A) 22,500
This option represents only the down payment amount, calculated as 15% of $150,000. While $22,500 is the correct down payment, it does not account for the additional costs associated with points, making it an incomplete answer.
B) 25,125
This figure does not accurately reflect the total costs involved in the purchase. It exceeds the necessary down payment amount and does not correctly calculate the points, indicating a misunderstanding of how to combine these costs.
C) 22,894
This amount is closer to the down payment but does not include the correct calculation for the points. Therefore, it fails to represent the total upfront expense needed, leaving out essential costs related to the loan.
D) 24,731
This is the correct total upfront amount the buyer needs. It includes the 15% down payment of $22,500 and the cost of 1.75 points on the loan amount, which amounts to $2,231. Thus, the total is $22,500 + $2,231 = $24,731.
Conclusion
The correct answer reflects the total upfront cost, combining both the down payment and the points charged by the lender. Options A, B, and C fail to account for the total financial obligation of the buyer, while D accurately captures both components of the upfront payment, confirming it as the only correct choice.