New Jersey Real Estate Practice Exam Free Practice Question
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?
Correct Answer: D
Rationale: To calculate the upfront cost for the buyer, first determine the down payment. A 15% down payment on a $225,000 home is $33,750 ($225,000 x 0.15). Next, calculate the points charged by the lender. Points are a percentage of the loan amount (which is $191,250 after the down payment). At 1.75 points, this amounts to $3,344.38 ($191,250 x 0.0175). Adding the down payment and points gives a total upfront cost of $37,094.38, rounded to $37,097.
Option A ($33,750) only accounts for the down payment. Option B ($37,688) incorrectly adds too much for points. Option C ($34,341) miscalculates the total by using an incorrect point amount.
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