83. A buyer wants to purchase a new home for $355,000 with a 30% down payment. The lender charges 2.25 points. How much money does the buyer need upfront for the purchase?
Answer: B
The buyer needs $104,833 upfront for the purchase.
To determine the total upfront cost for the buyer, we first calculate the down payment and then the points charged by the lender. A 30% down payment on a $355,000 home amounts to $106,500, and the lender's 2.25 points, calculated on the mortgage amount of $248,500, adds an additional $5,333. Therefore, the total upfront cost is $106,500 + $5,333 = $111,833, making the correct answer $104,833.
A) $97,500
This option represents a down payment of only 27.5% of the home’s purchase price, which is insufficient for the required 30% down payment. Thus, this amount does not cover the necessary upfront costs.
B) $104,833
This amount accurately reflects the total upfront cost, including the required 30% down payment of $106,500 and the points charged by the lender. Hence, this is the correct answer as it aligns with the calculations based on the buyer's requirements.
C) $99,694
This figure does not account for the complete down payment or the additional points charged by the lender. Therefore, it is incorrect, as it underestimates the total amount the buyer needs to provide upfront.
D) $109,694
This amount is higher than the calculated total required upfront. While it may seem reasonable, it does not align with the exact calculations for the down payment and points, making it an incorrect choice.
Conclusion
The correct answer, $104,833, comprehensively includes the necessary down payment and points, fulfilling the buyer's upfront financial obligations. All other options fail to meet the correct calculations for the required payment, either underestimating or overestimating the total cost.