New Jersey Real Estate Practice Exam Practice Question
A buyer wants to purchase a home for $250,000 with a 30% down payment. The lender charges 2.25 points. How much money does the buyer need up front to make the purchase?
Correct Answer: D
Rationale: To determine the upfront cost for the buyer, first calculate the down payment. A 30% down payment on a $250,000 home is $75,000 (0.30 x $250,000). Next, calculate the points charged by the lender. With 2.25 points, this amounts to $5,625 (0.0225 x $250,000). Adding these two figures together gives a total upfront cost of $80,625. However, the question specifies that the buyer needs to cover the down payment plus the points upfront, which amounts to $78,938 when considering the total loan amount after points are applied.
Options A ($75,000) only considers the down payment, while B ($80,625) mistakenly includes the total upfront cost without adjusting for points. Option C ($76,688) miscalculates the total by not properly accounting for the lender's fees. Thus, D ($78,938) accurately reflects the total funds needed for the purchase.
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