101. A buyer wants to purchase a home for $275,000 with a 20% down payment. The lender charges 2.25 points. How much money does the buyer need up front to make the purchase?
Answer: B
The buyer needs $61,188 up front to make the purchase.
To determine the upfront cost for the buyer, we first calculate the down payment and the points charged by the lender. The down payment is 20% of the purchase price, which amounts to $55,000, and the points, calculated on the loan amount, add an additional cost of $6,188, bringing the total upfront cost to $61,188.
A) $55,000
This option represents only the down payment, which is 20% of the home price. However, it does not account for the additional costs associated with points charged by the lender, making this option incorrect.
B) $61,188
This option accurately reflects the total upfront cost required by the buyer. It includes both the down payment of $55,000 and the cost of the points, which is $6,188 (2.25% of the loan amount of $220,000). Therefore, this option is correct.
C) $56,238
This amount does not correspond to the correct calculations for either the down payment or the points. It incorrectly combines elements of the costs, failing to include the full amount required for points, making this option incorrect.
D) $59,950
This figure is also inaccurate as it does not properly account for the down payment and points combined. It underestimates the total upfront cost necessary for the purchase, thus rendering this option incorrect.
Conclusion
The correct answer is $61,188, which encompasses both the down payment and the lender's points. All other options fail to provide the complete financial requirement needed for the purchase, either by neglecting the points or miscalculating the total amount. Thus, option B is the only accurate representation of the upfront costs involved in this transaction.