A house is sold for $150,000; the buyer obtains 80% loan and is paying 2 discount points. How much cash will he need to bring to closing?

• A. 32,400
• B. 30,000
• C. 34,400
• D. 31,000

Answer: (A)

The amount needed at closing comes from the down payment plus any discount points paid to obtain the loan. The house price is 150,000, and the loan covers 80%, so the loan amount is 0.80 × 150,000 = 120,000. The down payment is 20% of the price, which is 0.20 × 150,000 = 30,000. Discount points are 2% of the loan amount: 0.02 × 120,000 = 2,400. Add the down payment and the points: 30,000 + 2,400 = 32,400. So the cash to bring to closing is 32,400.