38. A buyer wants to purchase a home for $160,000 with a 15% down payment. The lender charges 2 points. How much money does the buyer need to close the transaction?
Answer: D
The buyer needs $26,720 to close the transaction.
To calculate the total amount the buyer needs to close the transaction, we first determine the down payment and then add the points charged by the lender. The down payment of 15% on a $160,000 home amounts to $24,000, and the 2 points (which equate to 2% of the loan amount) add an additional $2,720, leading to a total closing cost of $26,720.
A) $3,200
This option incorrectly represents the amount needed for closing costs. A down payment of 15% on the purchase price far exceeds this figure, indicating that this choice does not account for the necessary financial components required to close the transaction.
B) $23,520
While this amount is closer to the down payment, it does not include the lender's points. The total money required should encompass both the down payment and any fees charged by the lender, making this option insufficient.
C) $24,400
This figure incorrectly sums up the down payment and the lender's charges. Specifically, it does not include the complete costs associated with the transaction, particularly the points charged, thus representing an incomplete calculation.
D) $26,720
This option accurately represents the total closing cost. It includes the 15% down payment of $24,000 and the 2 points charged by the lender, which total $2,720, resulting in a complete amount of $26,720 that the buyer needs to close the transaction.
Conclusion
The correct answer is $26,720, as it accurately accounts for both the down payment and the lender's points. Other options fail to consider one or both of these essential financial components, thus leading to insufficient totals for closing the home purchase.