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 purchase a home for $300,000 with a 20% down payment, the buyer must provide $60,000 as a down payment. Additionally, the lender charges 1.5 points on the loan amount, which adds to the upfront cost, resulting in a total of $63,600.
A) $60,000
This option represents only the down payment of 20% on the $300,000 home. While it is a significant part of the upfront costs, it does not include the additional charges from the lender, making it an incomplete answer.
B) $64,500
This amount exceeds the required upfront costs. It mistakenly assumes a higher total cost, possibly by miscalculating the points or including unnecessary expenses. Therefore, it does not accurately reflect the correct total needed for the purchase.
C) $60,900
This figure is close to the down payment amount plus some additional costs but does not accurately calculate the total upfront needed. It fails to account for the full impact of the lender's points on the overall financing, making it incorrect.
D) $63,600
This option correctly calculates the total upfront amount needed, which includes the $60,000 down payment and the $3,600 in lender points (1.5% of the loan amount of $240,000). Thus, this is the correct answer.
Conclusion
The correct calculation of the upfront costs involves both the down payment and the lender's points. Option D accurately combines these elements to provide the total of $63,600, while all other choices fail to account for one or both of these necessary components, leading to their incorrectness.