23. A buyer wants to purchase a home for $300,000 with a 20% down payment. The lender charges 2.5 points. How much money does the buyer need up front to make the purchase?
Answer: B
The buyer needs $67,500 up front to make the purchase.
To calculate the upfront amount needed, the buyer requires a 20% down payment on a $300,000 home, which amounts to $60,000. Additionally, the lender charges 2.5 points on the loan amount, which adds another $7,500 to the total upfront cost, resulting in a total of $67,500.
A) $60,000
This option only considers the 20% down payment of the home price. While it correctly calculates the down payment, it fails to include the additional costs associated with points, which are necessary for determining the total upfront amount needed.
B) $67,500
This option accurately reflects the total upfront amount required for the purchase. It combines the $60,000 down payment with the $7,500 charge for 2.5 points, making it the correct answer that encompasses all necessary costs.
C) $61,500
This amount does not accurately reflect either the down payment or the points charged by the lender. The calculation incorrectly assumes a lower total cost and fails to include the necessary points fee, making it an incorrect option.
D) $66,000
This choice also miscalculates the total upfront cost by not fully accounting for the points charged by the lender. While it is closer than some other options, it still underestimates the total amount needed, making it incorrect.
Conclusion
The correct answer is $67,500, which includes both the down payment and the points charged by the lender. Options A, C, and D either neglect the points or miscalculate the total needed, demonstrating the importance of considering all associated costs in a home purchase. Thus, only option B provides the complete and accurate financial requirement.