47. A buyer wants to purchase a home for $250,000 with a 20% down payment. The lender charges 1.75 points. How much money does the buyer need up front to make the purchase?
Answer: C
The buyer needs $63,594 up front to make the purchase.
To determine the total amount needed up front, the buyer must calculate the down payment and the points charged by the lender. The down payment is 20% of $250,000, which is $50,000, and the points amount to $3,594, making the total up front cost $63,594.
A) $62,500
This option incorrectly calculates the total amount needed. While it represents the 20% down payment of $50,000, it fails to account for the additional costs associated with the points charged by the lender, resulting in an insufficient total.
B) $66,875
This choice is also incorrect as it overestimates the total amount needed. It seems to miscalculate the points or the down payment, leading to a figure that does not accurately reflect the sum of the down payment and the points.
C) $63,594
This option accurately reflects the total amount the buyer needs up front. The down payment of $50,000 plus the points, calculated as 1.75% of the loan amount ($250,000), which totals $3,594, gives the correct amount of $63,594.
D) $65,781
This option is incorrect because it suggests a total that exceeds the accurate calculation. It does not properly account for the down payment and points, leading to an inflated total that does not match the financial requirements of the purchase.
Conclusion
The correct answer, $63,594, accurately combines the down payment of $50,000 and the lender's points of $3,594, reflecting the total amount required upfront. All other options either underestimate or overestimate the necessary funds, failing to consider the total costs involved in the home purchase.