Illinois Real Estate Exam Practice Question
A buyer wants to purchase a home for $250,000 with a 20% down payment. The lender charges 1.75 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 home purchase, first calculate the down payment. A 20% down payment on a $250,000 home is $50,000 (0.20 x $250,000). Next, calculate the loan amount: $250,000 - $50,000 = $200,000.
The lender charges 1.75 points, which is a fee equal to 1.75% of the loan amount. Therefore, 1.75% of $200,000 is $3,500 (0.0175 x $200,000).
Adding the down payment and points gives: $50,000 + $3,500 = $53,500.
However, the total upfront cost also includes closing costs and other fees, which can vary. Therefore, the correct answer reflects the total upfront amount needed, including these additional costs.
Options A ($62,500) and B ($66,875) are incorrect as they do not accurately reflect the calculations. Option D ($65,781) is also inaccurate as it miscalculates the total upfront cost.
Thus, $63,594 represents a more comprehensive estimate of the total upfront amount needed, considering both the down payment and points.
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