# They plan to use their $40,000 is savings to cover the closing costs the bank will charge them,... ## Question: They plan to use their$40,000 is savings to cover the closing costs the bank will charge them, which are 1% of the amount they borrow from the bank. The rest of the savings will be used as a down payment. For example, if they borrow $330,000 using$20,000 for a down payment, the closing costs will be $3,300, which still leaves them some savings. Determine the largest amount they can use for a down payment and still pay the closing costs. ## Down Payment: The down payment is the upfront payment on a loan, which is to reduce the remaining balance and lower the interest expenses. In some cases, the down payment is required by laws to lower the risk for lenders. ## Answer and Explanation: Assume: • X: Amount of closing cost • Y: Amount of down payment The largest amount of down payment happens when they spend all of$40,000 for the down payment and closing costs.

X + Y = $40,000 (1) Purchase price =$330,000 + $20,000 =$350,000

X = ($350,000 - Y) x 1% (2) Substitute (2) to (1): ($350,000 - Y) x 1% + Y = $40,000 ==> Y =$36,869

==> X = $40,000 -$36,869 = \$3,131 