Question 48

The buyer needs $93,150 up front to make the purchase.

To determine the total amount the buyer needs to pay upfront, we must calculate the down payment and the points charged by the lender. The down payment on a $300,000 home at 30% is $90,000, and the points, which are 1.5% of the loan amount, add an additional $3,150, resulting in a total of $93,150.

A) $90,000

This option only accounts for the down payment of 30% of the home's purchase price. While $90,000 is the correct down payment, it does not include the additional cost of the points charged by the lender, making this option insufficient for the total upfront amount needed.

B) $94,500

This figure is incorrect as it miscalculates the total upfront cost. It may suggest a combination of the down payment and points, but it does not accurately reflect the calculation of the points based on the loan amount, thus leading to an incorrect total.

C) $91,350

This option represents an incorrect total as it underestimates the cost associated with the points on the loan amount. It does not correctly calculate the 1.5 points from the loan amount after the down payment, resulting in a total that is still short of the actual amount needed.

D) $93,150

This option correctly reflects the total upfront cost needed by the buyer. It includes the down payment of $90,000 plus the additional $3,150 for the points, which is calculated as 1.5% of the loan amount after the down payment. This makes it the accurate total that the buyer must pay upfront to proceed with the purchase.

Conclusion

The correct answer, $93,150, is derived from accurately calculating both the down payment and the lender's points. All other options fail to account for either the full payment required or miscalculate the points, thereby providing an incorrect total. Understanding the combination of these costs is essential in determining the actual upfront amount needed for a home purchase.