67. 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 calculate the upfront amount needed, we first determine the down payment of 20% on the $400,000 home, which amounts to $80,000. Additionally, the lender charges 1.5 points on the total loan amount, which is 1.5% of $320,000 (the price after the down payment), equaling $4,800. Therefore, the total upfront cost is $80,000 (down payment) + $4,800 (points) = $84,800.
A) $80,000
While this amount represents the 20% down payment, it does not include the points charged by the lender. Since the points are an essential part of the upfront cost, this option is incorrect.
B) $86,000
This option incorrectly calculates the total upfront cost. It does not accurately account for the points or the correct sum of the down payment and points, leading to an inflated figure. Thus, this option is not correct.
C) $81,200
This figure appears to be a miscalculation. It may reflect the down payment plus an incorrect assessment of the points. The accurate calculation shows that the total cost should be higher, making this option incorrect.
D) $84,800
This is the correct answer, as it accurately sums the down payment of $80,000 and the points of $4,800, leading to a total of $84,800. This amount reflects the total upfront cost required for the home purchase.
Conclusion
The correct answer is $84,800, which correctly accounts for both the down payment and the lender's points charge. The other options fail to provide the accurate total needed upfront, either by excluding points or miscalculating the sums involved. This calculation is critical for buyers to understand their total financial commitment when purchasing a home.