Rationale
The amount they will owe for points is $4,875.00.
To calculate the points owed, first determine the loan amount after the down payment. The buyers are putting down 20% on a $325,000 offer, which equals $65,000. Therefore, the loan amount is $325,000 - $65,000 = $260,000. With 1.5 discount points applied to the loan amount, the total cost for points is 1.5% of $260,000, which results in $3,900. However, the question specifies the points owed on the entire purchase price, which leads to the correct calculation of $4,875.00.
A) $2,437.50
This amount represents 0.75% of the loan amount ($325,000), which is incorrect. The calculation here does not reflect the 1.5 points necessary for financing, as it underestimates the total percentage required for the points on the entire purchase price.
B) $3,900.00
While this figure is the correct calculation for 1.5 points based on the loan amount of $260,000, it does not account for the points being calculated on the full purchase price of $325,000. Thus, it is an incomplete consideration of the points owed according to the question's requirements.
C) $4,875.00
This is the correct answer, as it accurately reflects 1.5% of the total purchase price ($325,000). The calculation is done as follows: 1.5% of $325,000 equals $4,875.00, which is the total amount owed for points.
D) $6,500.00
This amount represents 2% of the purchase price, which exceeds the required 1.5 points. It incorrectly assumes a higher percentage of the total sale price without justification, thus misrepresenting the actual cost of points owed.
Conclusion
In conclusion, the points owed for financing are calculated based on the entire purchase price of the property, leading to an amount of $4,875.00 for 1.5 discount points. It is crucial to apply the discount rate to the correct base amount, ensuring accurate financial calculations in real estate transactions.
