2. A buyer wants to purchase a home for $300,000 with a 20% down payment. The lender charges 1.5 points. How much money does the buyer need up front to make the purchase?
Answer: B
The buyer needs $64,500 up front to make the purchase.
To calculate the upfront cost, the buyer must cover both the down payment and the lender's fees. The down payment for a $300,000 home at 20% is $60,000, and the lender charges 1.5 points, which is $4,500. Therefore, the total upfront cost is $60,000 + $4,500 = $64,500.
A) $60,000
This option represents only the down payment of 20% on the home price. While this is a significant portion of the upfront costs, it does not include the additional fees charged by the lender, making this option incorrect.
B) $64,500
This option correctly totals the upfront costs by adding the $60,000 down payment and the $4,500 lender fees (1.5 points). This calculation encompasses all necessary payments to secure the home purchase, confirming that $64,500 is the correct amount needed upfront.
C) $60,900
This option incorrectly suggests an amount that does not correspond to either the down payment or the total costs involved. It fails to account for the lender's fees correctly, rendering this choice incorrect.
D) $63,600
This option appears to be a miscalculation of the total costs. It does not accurately reflect the sum of the down payment and the lender's fees. Thus, it is also incorrect.
Conclusion
The correct answer is $64,500 because it accurately includes both the down payment and the lender's fees. The other options fall short either by omitting necessary costs or miscalculating the total required upfront, confirming that they do not meet the buyer's financial requirements for the purchase.