New Jersey Real Estate Practice Exam Free Practice Question
A buyer wants to purchase a home for $275,000 with a 20% 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, start with the down payment. A 20% down payment on a $275,000 home amounts to $55,000. However, the buyer also needs to account for the lender’s fees, which are expressed in points. With 2.25 points on the loan amount (which is the purchase price minus the down payment), the loan amount is $220,000. Calculating 2.25% of $220,000 results in $4,950. Adding the down payment and the points gives a total upfront cost of $55,000 + $4,950 = $59,950.
Options A ($55,000) only includes the down payment, while B ($61,188) and C ($56,238) miscalculate the points or down payment. Thus, D accurately reflects the total upfront cost.
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