Refer to the following list of closing costs for purchase of a $ 175,000 house requiring a 20% down payment and find each requested amount.
Title insurance premium $ 240
Document recording fee 30
Loan fee ( two points) …..
Appraisal fee 225
Prorated property taxes 685
Prorated fire insurance premium 295
a) the mortgage amount
b )the loan fee
c)the total closing costs
d) the total amount of cash required of the buyer at closing ( including down payment)
To find the requested amounts, let's calculate each one step by step:
a) The mortgage amount:
Since the house requires a 20% down payment, the remaining amount that needs to be financed through a mortgage is 80% of the purchase price. Therefore, the mortgage amount can be calculated as:
Mortgage amount = Purchase price - Down payment
Mortgage amount = $175,000 - (20% of $175,000)
Mortgage amount = $175,000 - $35,000
Mortgage amount = $140,000
b) The loan fee:
The loan fee is given as two points. One point is equal to 1% of the mortgage amount. Therefore, the loan fee can be calculated as:
Loan fee = 2 points * Mortgage amount
Loan fee = 2% * $140,000
Loan fee = $2,800
c) The total closing costs:
To get the total closing costs, we add up all the individual closing costs provided:
Total closing costs = Title insurance premium + Document recording fee + Loan fee + Appraisal fee + Prorated property taxes + Prorated fire insurance premium
Total closing costs = $240 + $30 + $2,800 + $225 + $685 + $295
Total closing costs = $4,275
d) The total amount of cash required of the buyer at closing:
To calculate the total amount of cash required at closing, we need to consider the down payment and the total closing costs:
Total cash required = Down payment + Total closing costs
Total cash required = 20% of $175,000 + $4,275
Total cash required = $35,000 + $4,275
Total cash required = $39,275
Therefore, the answers are:
a) The mortgage amount = $140,000
b) The loan fee = $2,800
c) The total closing costs = $4,275
d) The total amount of cash required of the buyer at closing (including down payment) = $39,275