Question 43

The buyer needs $37,688 up front to make the purchase.

To determine the total amount needed up front, the buyer must calculate both the down payment and the points charged by the lender. The down payment is 15% of the home's price, which amounts to $33,750, and the points, which are 1.75% of the loan amount, add an additional cost of $3,938. Therefore, the total amount required upfront is $37,688.

A) $33,750

This option represents only the down payment, which is 15% of the home's purchase price of $225,000. While this amount is a significant part of the upfront cost, it does not include the additional points charged by the lender, which are necessary for the total calculation.

B) $37,688

This is the correct answer. It includes both the down payment of $33,750 (15% of $225,000) and the cost of the points, which is calculated as 1.75% of the loan amount. The loan amount, after the down payment, is $191,250, making the points $3,938. Adding these together results in a total of $37,688.

C) $34,341

This option incorrectly adds an amount that does not accurately reflect either the down payment or the points. The calculation seems to misinterpret the points or the percentage, leading to a figure that does not correspond with the correct financial requirements for the purchase.

D) $37,097

This option is also incorrect, as it does not account for the full points cost or miscalculates the total. The total upfront cost must include both the down payment and the accurate calculation of the points, which this figure fails to do.

Conclusion

The correct answer, $37,688, accurately reflects the total upfront cost, incorporating both the down payment and the lender's points. All other options fail to include the necessary calculations for the points or miscalculate the total, demonstrating a clear understanding of the financial requirements for purchasing a home.