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 is the total amount the buyer needs upfront for the home purchase.

To determine the upfront cost, we first calculate the down payment and the points charged by the lender. The down payment is 15% of the purchase price, and the points are calculated as a percentage of the loan amount, which is the purchase price minus the down payment.

A (22,500) YOUR ANSWER

This option represents the down payment alone, which is calculated as 15% of $150,000. However, it does not include the additional cost of the points charged by the lender, making it an incomplete calculation for the total upfront cost.

B (25,125) YOUR ANSWER

This amount seems to be an incorrect calculation of either the down payment or the points. It does not reflect the accurate sum of the down payment plus the points required upfront. Therefore, it cannot be the correct total.

C (22,894) YOUR ANSWER

This figure is not representative of the correct total as it does not account for the full calculations of the down payment and the points charged by the lender. It appears to be a miscalculation of either component, leading to an inaccurate total.

D (24,731) CORRECT

This total correctly combines the down payment of $22,500 (15% of $150,000) and the points charged, which are calculated on the financed amount of $127,500 (the purchase price minus the down payment). The points amount to $2,231, leading to a total upfront cost of $24,731.

Conclusion

The total upfront cost for the buyer purchasing a home for $150,000 with a 15% down payment and 1.75 points is $24,731. This includes both the down payment and the points charged by the lender, which are essential to determine the overall cash required to complete the home purchase. Understanding these calculations is crucial for prospective buyers when budgeting for a new home.

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 is the total amount the buyer needs upfront for the home purchase.

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