31. A buyer wants to purchase a home for $225,000 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 $37,097 up front to make the purchase.
To calculate the total amount needed up front, the buyer must pay a 15% down payment on the $225,000 home price and also cover the lender's 1.75 points. The total upfront cost includes both the down payment and the points.
A) $33,750
This option represents only the down payment amount. A 15% down payment on a $225,000 home is calculated as $225,000 x 0.15 = $33,750. However, it does not account for the additional cost of the points, making this option incorrect.
B) $37,688
This figure does not accurately represent the total upfront cost. While it may include a calculation involving the down payment and points, it does not align with the correct calculations based on the price of the home and the points charged by the lender.
C) $34,341
This amount incorrectly combines the down payment and the points. The calculation necessary to arrive at this figure does not properly reflect the percentage of points based on the purchase price, leading to an incorrect total.
D) $37,097
This is the correct answer. The down payment is $33,750 (15% of $225,000), and the points cost $3,347.50 (1.75% of $225,000), totaling $37,097 when combined. This accurately reflects the amount the buyer needs up front.
Conclusion
The correct total amount the buyer needs upfront is $37,097, which includes both the down payment and the points charged by the lender. Options A, B, and C fail to provide the correct total because they either neglect the points or miscalculate the amounts involved. Thus, D is the only option that accurately sums up the necessary upfront costs for the home purchase.