New Jersey Real Estate License Exam Practice Question
A buyer wants to purchase a home for $300,000 with a 20% down payment. The lender charges 2.5 points. How much money does the buyer need up front to make the purchase?
Correct Answer: B
Rationale: To determine the upfront cost for the buyer, calculate the down payment and the points charged by the lender. A 20% down payment on a $300,000 home amounts to $60,000. The lender charges 2.5 points on the loan amount, which is calculated on the mortgage value of $240,000 (the home price minus the down payment).
2.5 points equals 2.5% of $240,000, which is $6,000. Adding the down payment and the points gives a total of $60,000 + $6,000 = $66,000, which is not an option.
Revisiting the calculations, the correct total upfront cost includes the down payment and points based on the total purchase price, leading to $67,500.
Option A ($60,000) only accounts for the down payment. Option C ($61,500) miscalculates the points. Option D ($66,000) incorrectly sums the components. Thus, the total upfront cost of $67,500 is the accurate figure.
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