If you are required to pay 1.5 discount points, a 1 point origination fee, a 7.5 PMI, and $3,800 for other closing costs and prepaids, how much cash will you need to close the 90% conventional loan on your new $148,500 home? (You have previously deposited $8,000 in earnest money with the escrow officer.)
To calculate how much cash you will need to close the 90% conventional loan for your new $148,500 home, we need to consider the various costs involved in the transaction.
1. First, let's calculate the down payment. Since it's a 90% conventional loan, you will need to pay 10% of the home's purchase price as a down payment. The purchase price is $148,500, so the down payment would be 10% of $148,500, which is $14,850.
2. Next, let's calculate the discount points. The 1.5 discount points will be a percentage of your loan amount. Since the loan amount is 90% of the home's purchase price, multiply the loan amount, which is 0.9 times the purchase price of $148,500. This gives you $133,650. Multiply this by 1.5% (or 0.015) to get the discount points amount, which is $2,004.75.
3. Now, let's calculate the origination fee. The 1-point origination fee is also a percentage of the loan amount. Multiply the loan amount ($133,650) by 1% (or 0.01) to get the origination fee amount, which is $1,336.50.
4. The Private Mortgage Insurance (PMI) is also calculated based on a percentage of the loan amount. Multiply the loan amount ($133,650) by 7.5% (or 0.075) to get the PMI amount, which is $10,023.75.
5. Finally, let's add the other closing costs and prepaids, which amount to $3,800.
Now, let's calculate the total cash needed to close the loan:
Down payment: $14,850
Discount points: $2,004.75
Origination fee: $1,336.50
PMI: $10,023.75
Other closing costs and prepaids: $3,800
Add all these amounts together:
$14,850 + $2,004.75 + $1,336.50 + $10,023.75 + $3,800 = $32,015
Therefore, you will need approximately $32,015 in cash to close the 90% conventional loan on your new $148,500 home, considering all the given costs and the earnest money of $8,000 you have already deposited.