Maryland Home Improvement PSI Practice Exam

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Prepare for the Maryland Home Improvement Test. Study using flashcards and multiple-choice questions, each with hints and explanations. Get ready to excel on your exam!

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A buyer wants to purchase a home for $160,000 with a 15% down payment. The lender charges 2 points. How much money does the buyer need up front to make the purchase?

$2,720.
$24,000.
$24,408.
$26,720.

The correct answer is: $26,720.

To calculate how much money the buyer needs up front to purchase the home, we need to determine the down payment and the points charged by the lender. First, the buyer is making a 15% down payment on a home priced at $160,000. To find the down payment amount, we calculate: \[ Down \, Payment = Purchase \, Price \times Down \, Payment \, Percentage \] \[ Down \, Payment = 160,000 \times 0.15 = 24,000 \] Next, the lender charges 2 points. Points are a percentage of the loan amount, and in this case, the loan amount is the purchase price minus the down payment. The loan amount can be calculated as: \[ Loan \, Amount = Purchase \, Price - Down \, Payment \] \[ Loan \, Amount = 160,000 - 24,000 = 136,000 \] Now, to find the cost of the points, we calculate: \[ Points \, Cost = Loan \, Amount \times Points \, Percentage \] \[ Points \, Cost = 136,000 \times 0.02 = 2,