Each of the following mortgage loans is for $155,000.The closing costs on each loan will be $4,200,and all points will be paid by the buyer.Which loan requires the most money to be paid up front at closing?

Question

Quizplus · Accepted Answer

The adjustable-rate mortgage (ARM) with 5 percent interest and 2 points will require the most money to be paid up front at closing. 
Closing costs: $4,200 
Points: 2 points x $155,000 = $3,100 
Total: $4,200 + $3,100 = $7,300

The FHA-insured mortgage with 7 percent interest and 1 point will require: 
Closing costs: $4,200 
Points: 1 point x $155,000 = $1,550 
Total: $4,200 + $1,550 = $5,750

The conventional mortgage with 8 percent interest and 0 points will require: 
Closing costs: $4,200 
Points: 0 points x $155,000 = $0 
Total: $4,200 + $0 = $4,200

So, the best choice for the buyer would be the conventional mortgage as it requires the least amount of money to be paid up front at closing.

Each of the Following Mortgage Loans Is for $155,000