31. A buyer wants to purchase a home for $400,000 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 $84,800 up front to make the purchase.
To purchase a home for $400,000 with a 20% down payment, the buyer must pay $80,000 upfront as the down payment and an additional $4,800 for points charged by the lender, totaling $84,800.
A) $80,000
While $80,000 represents the 20% down payment required for a $400,000 home, it does not include the additional costs associated with the lender's points. Therefore, this option is incorrect as it does not account for the total upfront cost.
B) $86,000
This option is incorrect because it overestimates the total upfront cost. The correct calculation includes the down payment and points, which totals $84,800, not $86,000.
C) $81,200
This amount incorrectly represents the total upfront cost. While it includes a portion of the down payment, it does not accurately reflect the total when adding the lender's points. Thus, this option is also incorrect.
D) $84,800
This is the correct calculation for the total upfront cost. It includes the 20% down payment of $80,000 plus the cost of 1.5 points on the loan amount, which amounts to $4,800. Therefore, $80,000 + $4,800 equals $84,800.
Conclusion
The correct answer, $84,800, accurately reflects the total amount the buyer needs to pay upfront, combining the required down payment and the additional fees for points. All other options fail to incorporate either the necessary down payment or the lender's charges, leading to incorrect totals.