Tennessee Real Estate License 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 calculate the upfront costs for the home purchase, first determine 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. Points are a percentage of the loan amount, which is the purchase price minus the down payment. The loan amount is $250,000 - $75,000 = $175,000. The lender charges 2.25 points, equating to $3,937.50 (0.0225 x $175,000). Adding the down payment and the points gives $75,000 + $3,937.50 = $78,937.50, rounded to $78,938.
Options A ($75,000) only accounts for the down payment. Option B ($80,625) incorrectly sums the down payment and an inflated points calculation. Option C ($76,688) miscalculates the points and does not reflect the total upfront cost. Thus, D accurately reflects the total amount required for the purchase.
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