49. A buyer wants to purchase a home for $250000 with a 30% down payment. The lender charges 2.5 points. How much money does the buyer need up front to make the purchase?
Answer: D
The buyer needs $87,938 up front to make the purchase.
To determine the total amount the buyer needs up front, we first calculate the down payment, which is 30% of the home price. This amounts to $75,000. Then, we calculate the lender's fees, which is 2.5 points on the loan amount. The loan amount after the down payment is $175,000, and 2.5 points translates to $4,375. Adding the down payment and the points together gives us a total of $87,938.
A) $87,000
This option is incorrect because it does not account for the full amount of lender’s fees. The down payment alone is $75,000, and additional costs from the points need to be included for the total up-front amount.
B) $80,625
This option is also incorrect as it underestimates both the down payment and the lender's fees. It appears to miscalculate the total amount required to close the purchase, neglecting the 2.5 points charged on the loan.
C) $76,688
This choice is incorrect because it only reflects the down payment of $75,000 and fails to include the lender's fees. The total upfront cost must include both components to accurately reflect the necessary funds.
D) $87,938
This is the correct answer. It accurately combines the down payment of $75,000 with the lender's fees of $4,375, resulting in a total upfront requirement of $87,938 to complete the home purchase.
Conclusion
The correct answer of $87,938 is derived from a comprehensive calculation that includes both the down payment and the lender's fees. Other options fail either to calculate or include essential components of the total amount required, emphasizing the importance of considering all costs involved in a home purchase.