A buyer wants to purchase a home for $150,000 with a 15% down payment. The lender charges 1.75 points. How much money does the buyer need up front to make the purchase?

Rationale

$24,731

To calculate the upfront costs for the buyer, we need to determine the down payment and the points charged by the lender. The 15% down payment on a $150,000 home amounts to $22,500, and the points add additional costs that need to be included in the total upfront payment.

A ($22,500) YOUR ANSWER

This amount represents only the 15% down payment required for the home purchase. It does not include the cost of the points charged by the lender, which is essential for calculating the total upfront expense.

B ($26,125) YOUR ANSWER

This figure incorrectly combines the down payment and a miscalculated amount for points. The total upfront payment must include both the down payment and the correct total of points based on the loan amount, leading to an inaccurate total.

C ($22,894) YOUR ANSWER

This choice appears to be a miscalculation of the total upfront costs. It likely includes a partial amount for points but does not accurately reflect the full amount due, which should include both the correct down payment and the total points charged.

D ($24,731) CORRECT

This total accurately sums the 15% down payment of $22,500 and the points cost calculated from the loan amount. The points are calculated as 1.75% of the loan amount ($127,500 after the down payment), which adds approximately $2,231 to the upfront costs, resulting in a total of $24,731.

Conclusion

The correct upfront payment for the home purchase, accounting for both the down payment and lender's points, totals $24,731. This amount ensures that the buyer has covered all necessary initial costs to complete the purchase, illustrating the importance of considering both elements in real estate transactions.

A buyer wants to purchase a home for $150,000 with a 15% down payment. The lender charges 1.75 points. How much money does the buyer need up front to make the purchase?

$24,731

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