A buyer makes a 25% down payment on their home. They obtain a loan commitment for $240,000. The purchase price is:

Rationale

The purchase price is $320,000.

To find the purchase price, we must account for the down payment percentage and the loan amount. A 25% down payment indicates that the loan covers 75% of the total purchase price. By calculating the total price based on the loan amount, we can confirm that it equals $320,000.

A ($265,000) YOUR ANSWER

If the purchase price were $265,000, a 25% down payment would amount to $66,250, leaving a loan amount of $198,750 (which is 75% of $265,000). Since the loan commitment is for $240,000, this option does not satisfy the loan amount.

B ($300,000) YOUR ANSWER

For a purchase price of $300,000, the 25% down payment would be $75,000, resulting in a loan of $225,000 (75% of $300,000). Again, this does not match the loan commitment of $240,000, making this option incorrect.

C ($320,000) CORRECT

With a purchase price of $320,000, the 25% down payment would be $80,000, leading to a loan amount of $240,000 (which is 75% of $320,000). This aligns perfectly with the loan commitment provided, confirming this as the correct option.

D ($345,000) YOUR ANSWER

If the purchase price were $345,000, the 25% down payment would be $86,250, resulting in a loan amount of $258,750 (75% of $345,000). This exceeds the loan commitment of $240,000, eliminating this choice as a possibility.

Conclusion

The correct calculation reveals that the purchase price of the home must be $320,000 to match the given loan commitment of $240,000 after accounting for the necessary 25% down payment. All other options do not align with the loan amount required, emphasizing the importance of accurate financial calculations in real estate transactions.

A buyer makes a 25% down payment on their home. They obtain a loan commitment for $240,000. The purchase price is:

The purchase price is $320,000.

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