16. A buyer wants to purchase a home for $325,000 with a 30% down payment. The lender charges 2.25 points. How much money does the buyer need up front to make the purchase?
Answer: D
The buyer needs $102,619 up front to make the purchase.
To purchase the home for $325,000 with a 30% down payment, the buyer needs to pay both the down payment and the points charged by the lender. The down payment is $97,500, and the points amount to $5,119, bringing the total upfront cost to $102,619.
A) $97,500
This option represents only the down payment of 30% of the home price. While it is a significant part of the upfront costs, it does not include the additional expense of the points charged by the lender, making it insufficient.
B) $104,813
This figure is incorrect as it does not accurately reflect the total amount needed upfront. It does not account for the correct calculation of points on the loan amount, which would affect the total cost required at the time of purchase.
C) $99,694
This option is also incorrect because it underestimates the total upfront cost. It fails to accurately sum both the down payment and the points, leading to a total that does not reflect the actual financial requirement.
D) $102,619
This is the correct option as it correctly includes both the down payment of $97,500 and the points that amount to $5,119, totaling $102,619 needed upfront.
Conclusion
The total upfront cost of $102,619 is derived from combining the necessary down payment and the lender's points. Options A, B, and C fail to provide the correct total by neglecting the points or inaccurately calculating the necessary amounts, making D the only accurate choice.