87. 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 determine the total amount the buyer needs to pay upfront, we first calculate the down payment and then add the points charged by the lender. The down payment of 15% on a $150,000 home is $22,500, and the points amount to $2,231, bringing the total needed upfront to $24,731.
A) $22,500
This option represents only the down payment of 15% on the home purchase price. While it is a necessary part of the total upfront cost, it does not include the lender's points, which are also required to be paid upfront. Therefore, this option is incorrect.
B) $26,125
This figure does not accurately reflect the calculations for either the down payment or the points. The down payment is $22,500, and adding any reasonable estimate of points would not result in this amount. Hence, this option is incorrect.
C) $22,894
This option seems to be an improper calculation that does not correctly account for the 1.75 points on the loan. The total upfront cost must include both the down payment and the points, making this option inaccurate.
D) $24,731
This option correctly combines the down payment of $22,500 with the cost of the points, which is calculated as 1.75% of the loan amount. The points amount to $2,231, making the total upfront payment $24,731. Therefore, this option is correct.
Conclusion
The correct total amount of $24,731 includes both the required down payment and the lender's points, ensuring the buyer is fully prepared for the upfront costs. All other options fail to account for one or both components of the necessary payment, confirming that D is the only accurate choice.