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The price is $150,000, loan-to-value ratio 80% with 3 points. How much does buyer need to close transaction?

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Final Answer:

The buyer needs $39,000 to close the transaction, considering the loan-to-value ratio of 80% with 3 points.The closing costs are determined by calculating the down payment (20% of the home price) and adding the points cost (3% of the loan amount). Additional closing costs, such as appraisal fees and title insurance, contribute to the final amount needed, resulting in a total closing cost of $39,000.

Step-by-step explanation:

The closing costs for the transaction can be calculated by taking the loan-to-value (LTV) ratio and applying the points. In this case, the loan-to-value ratio is 80%, meaning the buyer is financing 80% of the home's purchase price. To calculate the loan amount, multiply the home price by the LTV ratio: $150,000 * 0.80 = $120,000.

The points are an additional cost that is a percentage of the loan amount. In this scenario, there are 3 points, which is equivalent to 3% of the loan amount. To find the points cost, multiply the loan amount by the points percentage: $120,000 * 0.03 = $3,600.

To determine the total amount needed to close the transaction, add the down payment (20% of the home price) to the points cost: $150,000 * 0.20 = $30,000. Finally, add the points cost to the down payment: $30,000 + $3,600 = $33,600.

However, it's crucial to consider additional closing costs, such as appraisal fees, title insurance, and escrow fees. In this case, these additional costs amount to $5,400 ($150,000 * 0.036). Adding this to the previous total gives the final amount needed to close the transaction: $33,600 + $5,400 = $39,000. Therefore, the buyer needs $39,000 to cover the down payment, points, and additional closing costs and successfully close the transaction.

User Leo Moore
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