A buyer is purchasing a $625,000 property. The lender requires a 20% down payment to avoid mortgage insurance. The buyer provided $5,000 in earnest money. The buyer closing costs are $13,000. What is the amount the buyer must bring to settlement to close the transaction?

Rationale

The amount the buyer must bring to settlement to close the transaction is $133,000.

To calculate the total amount the buyer needs at settlement, we first determine the required down payment, closing costs, and then subtract the earnest money already provided. The down payment on a $625,000 property at 20% is $125,000, and with closing costs of $13,000, the total amount due at settlement is $138,000. After deducting the $5,000 earnest money, the final amount to bring is $133,000.

A (120,000) YOUR ANSWER

This amount is incorrect because it underestimates the required down payment and closing costs. The down payment alone is $125,000, which is already higher than this option, and does not account for the $13,000 in closing costs.

B (133,000) CORRECT

This is the correct answer, as it accurately reflects the total settlement amount after accounting for the down payment of $125,000, closing costs of $13,000, and subtracting the $5,000 earnest money. The calculation is: $125,000 + $13,000 - $5,000 = $133,000.

C (138,000) YOUR ANSWER

While this amount represents the total of the down payment and closing costs ($125,000 + $13,000), it fails to factor in the earnest money already paid. Therefore, this option does not represent the correct balance needed at settlement.

D (143,000) YOUR ANSWER

This option is incorrect as it mistakenly adds an additional $5,000 to the total amount needed at settlement. It does not account for the earnest money deposit, which reduces the total amount required.

Conclusion

The buyer must bring $133,000 to settlement, which is derived from the sum of the required down payment and closing costs, adjusted for the earnest money already provided. Understanding these components is crucial for buyers navigating real estate transactions to ensure they are fully prepared for the closing process.

A buyer is purchasing a $625,000 property. The lender requires a 20% down payment to avoid mortgage insurance. The buyer provided $5,000 in earnest money. The buyer closing costs are $13,000. What is the amount the buyer must bring to settlement to close the transaction?

The amount the buyer must bring to settlement to close the transaction is $133,000.

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