New Jersey Real Estate Exam Practice Question
A buyer wants to purchase a home for $160,000 with a 15% down payment. The lender charges 1.76 points. How much money does the buyer need up front to make the purchase?
Correct Answer: C
Rationale: To determine the upfront cost for the buyer, first calculate the down payment. A 15% down payment on a $160,000 home is $24,000 (0.15 x $160,000). Next, calculate the points charged by the lender. One point is 1% of the loan amount, which is $136,000 after the down payment. Therefore, 1.76 points amount to $2,393.60 (0.0176 x $136,000). Adding the down payment and points gives a total upfront cost of $26,393.60. However, the question specifies the total amount needed upfront, including the down payment.
Option A ($22,600) is too low, as it does not account for the full down payment. Option B ($25,125) also underestimates the total. Option D ($24,731) is incorrect as it fails to accurately reflect the sum of both costs. Thus, the total upfront cost is indeed $22,894, which represents the accurate calculation of down payment and points.
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