A buyer wants to purchase a new home for $355,000 with a 30% down payment. The lender charges 2.25 points. How much money does the buyer need upfront for the purchase?

Rationale

$104,833

To determine the upfront cost for the buyer, we first calculate the down payment and the points charged by the lender. The down payment is 30% of the home price, which totals $106,500, and the points amount to 2.25% of the loan amount, adding an additional $1,833. Therefore, the total upfront cost is $104,833.

A ($97,500) YOUR ANSWER

This amount represents only a portion of the down payment, specifically 27.5% of the home price. It does not account for the additional costs from the points charged by the lender, which are necessary to calculate the total upfront payment.

B ($104,833) CORRECT

This is the correct total amount required upfront. It includes the full 30% down payment of $106,500 and the cost of the points, which is $1,833 (2.25% of the loan amount after the down payment). Thus, the total is $104,833.

C ($99,694) YOUR ANSWER

This figure does not accurately reflect either the down payment or the points. It may stem from an incorrect calculation of the down payment or failing to include the costs of the points, resulting in a lower total than what is required.

D ($109,694) YOUR ANSWER

This option incorrectly combines the down payment and points. It does not accurately represent the calculations, as the total upfront cost is lower than this amount, indicating a misunderstanding of how points are calculated in relation to the down payment.

Conclusion

The total upfront cost for the buyer purchasing a home for $355,000, incorporating both the down payment and the lender's points, is $104,833. This amount ensures the buyer is fully prepared for the initial financial requirements of the home purchase, including both the substantial down payment and the associated costs from the lender. Understanding these calculations is crucial for any homebuyer to ensure financial readiness.

A buyer wants to purchase a new home for $355,000 with a 30% down payment. The lender charges 2.25 points. How much money does the buyer need upfront for the purchase?

$104,833

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