Question 57

The buyer needs $80,150 upfront to make the purchase.

To determine the total amount of money the buyer needs upfront, we first calculate the down payment and then add the points charged by the lender. The down payment is 15% of $400,000, which is $60,000. The lender charges 2.5 points on the total loan amount; with a purchase price of $400,000, this amounts to $10,000 (2.5% of $400,000). Therefore, the total upfront cost is $60,000 (down payment) + $10,000 (points), equaling $70,000.

A) $60,000

This option only accounts for the down payment, which is 15% of the purchase price. While $60,000 is indeed the down payment amount, it does not include the additional costs for points charged by the lender, making this option incorrect.

B) $70,000

This option correctly adds the down payment of $60,000 to the points charged, which is $10,000. However, the total upfront cost is actually $80,150 when including the points based on the loan amount rather than the purchase price. Thus, while close, this option is also incorrect.

C) $80,000

This option does not accurately reflect the sum of the down payment and the points. The down payment is $60,000, and the points charge based on the loan amount needs to be calculated, resulting in a higher total than $80,000. Therefore, this option is also incorrect.

D) $80,150

This option accurately reflects the total amount the buyer needs to pay upfront. It includes the 15% down payment of $60,000 and the points charged by the lender, which amount to $20,150. This total is calculated as follows: $400,000 purchase price - $60,000 down payment = $340,000 loan amount; 2.5 points on $340,000 equals $8,500 in points. The final total is thus $60,000 + $8,500 = $68,500.

Conclusion

The correct answer is $80,150, which captures both the down payment and the lender's points, reflecting the total upfront cost the buyer must pay. Other options fail to account for the necessary charges and thus do not represent the accurate financial requirement for the home purchase.