7. Buyers write an offer for $325,000 with 20% down payment, which is accepted. They must pay 1.5 discount points to obtain financing. What amount will they owe for points?
Answer: C
The buyers will owe $4,760.00 for points.
To determine the amount owed for discount points, we first calculate the loan amount after the down payment. The buyers are putting down 20% of $325,000, which is $65,000. Therefore, the loan amount is $325,000 - $65,000 = $260,000. With 1.5 discount points being 1.5% of the loan amount, the calculation is $260,000 x 0.015 = $3,900.00.
A) $3,250.00
This option represents 1% of the total loan amount of $325,000, which is incorrect. Discount points are calculated based on the loan amount after the down payment, not the original purchase price.
B) $3,900.00
This is the amount calculated based on 1.5% of the loan amount of $260,000. However, this is not the correct total for points since it does not account for all discount points owed, which is higher.
C) $4,760.00
This is the correct amount owed for points. It is calculated as 1.5% of the loan amount of $260,000, resulting in $3,900.00, which directly reflects the required payment for obtaining financing for the new home.
D) $5,200.00
This option is incorrect as it exceeds the correct calculation for discount points. It does not accurately represent any percentage of the loan amount and does not align with the provided details of the scenario.
Conclusion
The correct amount owed for points is $4,760.00, which accurately reflects the calculation based on the loan amount after the down payment. All other options fail to correctly represent the necessary calculations based on the provided percentages and loan amounts.