PSI New Jersey Real Estate State Practice Exam

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Prepare for the New Jersey Real Estate Exam. Study with flashcards and multiple-choice questions, each with hints and explanations. Ace your exam confidently!

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If a buyer wants to purchase a home for $160,000 with a 15% down payment and the lender charges 2 points, how much money does the buyer need up front?

$24,000
$26,720
$32,000
$38,400

The correct answer is: $26,720

To determine how much money the buyer needs upfront, we need to calculate both the down payment and the points charged by the lender. First, let's calculate the down payment. The buyer is purchasing a home for $160,000 and plans to put down 15%. To find the down payment amount, multiply the purchase price by the down payment percentage: Down payment = $160,000 x 0.15 = $24,000. Next, we need to account for the points charged by the lender. Points refer to a percentage of the loan amount, used to lower the interest rate. In this case, the lender charges 2 points. The loan amount is the purchase price minus the down payment: Loan amount = $160,000 - $24,000 = $136,000. To find the cost of the points, calculate 2% of the loan amount: Points cost = $136,000 x 0.02 = $2,720. Now, to find the total upfront cost for the buyer, add the down payment to the points cost: Total upfront cost = Down payment + Points cost = $24,000 + $2,720 = $26,720. Thus, the buyer needs a total of