A buyer wants to purchase a home for $300,000 with a 30% down payment. The lender charges 1.5 points. How much money does the buyer need up front to make the purchase?

Rationale

$93,150 is the total amount the buyer needs up front to purchase the home.

To calculate the upfront cost for the buyer, we first determine the down payment and then add the points charged by the lender. The down payment is 30% of $300,000, which amounts to $90,000. The points, calculated as 1.5% of the loan amount (which is $210,000 after the down payment), add an additional $3,150, resulting in a total of $93,150.

A ($90,000) YOUR ANSWER

This option only reflects the down payment, which is 30% of the home price. However, it does not account for the additional cost of the points charged by the lender, which is crucial for determining the total upfront amount required to close the purchase.

B ($94,500) YOUR ANSWER

This choice erroneously adds a higher amount for the points than is actually calculated. The correct points amount is based on the loan balance, which is $210,000; therefore, the points should be $3,150, not leading to a total of $94,500.

C ($91,350) YOUR ANSWER

This option inaccurately combines the down payment with an incorrect points calculation. While it does account for the down payment of $90,000, it assumes points are calculated incorrectly, which leads to a miscalculated total that does not reflect the true upfront cost.

D ($93,150) CORRECT

This is the correct total amount, which combines the down payment of $90,000 with the points of $3,150, leading to the accurate upfront cost required by the buyer.

Conclusion

To successfully purchase the home, the buyer must provide an upfront amount that incorporates both the down payment and the lender's charges. By accurately calculating these components, we find that the total upfront cost required is $93,150, ensuring the buyer is fully prepared for the purchase.

A buyer wants to purchase a home for $300,000 with a 30% down payment. The lender charges 1.5 points. How much money does the buyer need up front to make the purchase?

$93,150 is the total amount the buyer needs up front to purchase the home.

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