57. A buyer wants to purchase a home for $250000 with a 25% down payment. The lender charges 1.75 points. How much money does the buyer need up front to make the purchase?
Answer: B
The buyer needs $66,875 up front to make the purchase.
To determine the amount of money the buyer needs up front, we must calculate the down payment and the points charged by the lender. The down payment is 25% of the purchase price, which equals $62,500, and the points, which are 1.75% of the loan amount ($187,500), add an additional $3,375. Therefore, the total amount needed up front is $66,875.
A) $62,500
Option A represents only the down payment, which is 25% of the purchase price. However, it does not include the additional cost of the points charged by the lender, which is also a necessary upfront cost. Therefore, this option is incorrect.
B) $66,875
This option accurately reflects the total amount required up front, which includes both the down payment of $62,500 and the points of $3,375. This calculation is essential for understanding the total initial investment required by the buyer.
C) $85,594
Option C presents an incorrect total, as it does not correctly calculate the down payment and the points. The sum exceeds the actual required upfront costs, indicating a miscalculation of either the down payment percentage or the points assessed by the lender.
D) $88,781
This option is also incorrect as it inaccurately tallies the necessary upfront costs. It overestimates the expenses involved in the transaction by not adhering to the proper calculations for both the down payment and the points, leading to an inflated total.
Conclusion
The correct answer, $66,875, is the sum of the down payment and the points, making it the total amount the buyer must provide upfront. All other options lack one or both components of the necessary costs, failing to provide an accurate financial requirement for the purchase of the home. Thus, option B is definitively the only correct answer.