89. 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: D
The buyer needs $63,600 up front to make the purchase.
To determine the total amount the buyer needs upfront, we first calculate the down payment and then the points charged by the lender. The down payment is 20% of $300,000, which amounts to $60,000. The points are calculated as 1.5% of the loan amount ($240,000), resulting in an additional $3,600. Therefore, the total upfront cost is $60,000 (down payment) + $3,600 (points) = $63,600.
A) $60,000
This option only represents the down payment required for the home purchase, which is 20% of the purchase price. However, it does not include the additional costs associated with the points charged by the lender, making this amount insufficient for the total upfront payment.
B) $64,500
This figure is higher than the down payment but does not correctly account for the total amount needed including the points. The calculation does not align with the percentage of points applied to the loan amount, which results in a miscalculation.
C) $60,900
This option incorrectly adds a small amount to the down payment, but it fails to accurately incorporate the points. The total upfront payment must include both the down payment and the correct amount for the lender's points, making this option incorrect.
D) $63,600
This is the correct answer because it accurately reflects the total upfront costs the buyer needs to cover. It combines the down payment of $60,000 with the $3,600 in points, totaling $63,600.
Conclusion
The correct choice of $63,600 reflects the necessary upfront payment, incorporating both the down payment and the lender's points. Options A, B, and C fail to account for the additional costs, making them incorrect. Thus, D is the only option that correctly represents the total amount the buyer needs to pay initially.