Larry and Laurie have found a home and made a $125,000 offer that has been accepted. They make a down payment of 10%. Their bank charges a loan origination fee of 1% of the loan and points of 1.5% (both are based on the loan amount). Other fees include a $25 loan application fee, a $250 appraisal fee, and $350 for title search and insurance. How much cash will Larry and Laurie need at closing?
Closing fees are expenses associated with completing a mortgage loan. The fees will include agreed down payments, plus other expenses such as origination fees, application fees and appraisal fees.
Answer and Explanation:
The total closing cost is the sum of the down payment and fees. Given a 125,000 loan and a 10% down payment, the total down payment required is:
- 125,000 * 10% = 12,500
The sum of origination fee and points are 2.5% of the loan amount, which is:
- 125,000 * 2.5% = 3,125
The total fees = 3,125 + 25 + 250 + 350 = 3,750. So the total cash they need at closing is:
- 12,500 + 3,750 = 16,250.
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from Finance 102: Personal FinanceChapter 7 / Lesson 4