A buyer wants to purchase a home for $225,000 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

$37,688 is the upfront amount the buyer needs to make the purchase.

To determine the total upfront payment required for the home purchase, we first calculate the down payment and the points charged by the lender. The down payment, which is 15% of $225,000, amounts to $33,750, and the points, calculated as 1.75% of the loan amount, total $3,938. Adding these two amounts together gives the total upfront cost of $37,688.

A ($33,750) YOUR ANSWER

This choice represents only the down payment, which is 15% of the home price. While it is an essential component of the upfront cost, it does not account for the additional points charged by the lender, which are also required to be paid upfront.

B ($37,688) CORRECT

This is the correct choice, as it accurately includes both the down payment of $33,750 and the lender's points of $3,938. Thus, the total upfront amount needed to purchase the home is $37,688.

C ($34,341) YOUR ANSWER

This option does not correctly reflect the necessary calculations. It appears to mistakenly adjust the down payment or points, resulting in an erroneous figure that falls short of the actual total upfront cost.

D ($37,097) YOUR ANSWER

This choice inaccurately combines the down payment and points. It underestimates the points charged by the lender, leading to a total that does not meet the required upfront payment for the home purchase.

Conclusion

In summary, the buyer must pay a total of $37,688 upfront to purchase the home, which includes a down payment of $33,750 and points amounting to $3,938. Understanding the components of upfront costs, including both down payments and additional fees like points, is crucial for prospective homebuyers to prepare adequately for their purchase.

A buyer wants to purchase a home for $225,000 with a 15% down payment. The lender charges 1.75 points. How much money does the buyer need up front to make the purchase?

$37,688 is the upfront amount the buyer needs to make the purchase.

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