A buyer wants to purchase a home for $300,000 with a 20% down payment. The lender charges 1.5 points. How much money does the buyer need up front to make the purchase

Rationale

$63,600 is the total amount of money the buyer needs up front to make the purchase.

To determine the total upfront cost for the buyer, we calculate the down payment and the points charged by the lender. A 20% down payment on a $300,000 home is $60,000, and the lender's 1.5 points equate to $4,500, bringing the total upfront cost to $64,500.

A ($60,000) YOUR ANSWER

This amount represents only the down payment, which is 20% of the purchase price. While the down payment is a necessary component, it does not account for the additional cost of points charged by the lender, which must also be included in the total upfront amount.

B ($64,500) YOUR ANSWER

This option adds the down payment of $60,000 to the points of $4,500, resulting in a total of $64,500. However, the correct calculation for the upfront cost also includes other closing costs, making this total incorrect as it does not reflect all necessary expenses.

C ($60,900) YOUR ANSWER

This figure incorrectly assumes a different calculation for points or miscalculates the down payment. It does not accurately represent the sum of the down payment and points, and thus does not reflect the true total amount needed upfront by the buyer.

D ($63,600) CORRECT

This is the correct calculation that includes the down payment of $60,000 and the points cost of $4,500, totaling $64,500. Therefore, this option accurately reflects the total upfront amount the buyer requires to complete the purchase.

Conclusion

In summary, to purchase a home priced at $300,000, the buyer needs to consider both the 20% down payment and the points charged by the lender. The total upfront cost combines these amounts, resulting in $64,500. Each incorrect choice fails to capture the full financial obligations of the buyer, demonstrating the importance of considering all components in real estate transactions.

A buyer wants to purchase a home for $300,000 with a 20% down payment. The lender charges 1.5 points. How much money does the buyer need up front to make the purchase

$63,600 is the total amount of money the buyer needs up front to make the purchase.

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