Answers26-27 Ignite Technical Math-Financial Math - MA2007MortgagesQuestion 67
67
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Question 67 • 26-27 Ignite Technical Math-Financial Math - MA2007

A lender estimates the closing costs on a home loan of $50,000 as listed below. Closing Cost Charge Loan origination $200 Title insurance $530 Attorney’s fees $600 Appraisal $265 Inspection $575 Recording fees $130 Escrow $800 If the lender's good faith estimates are accurate, are they a reasonable amount for closing costs? Why or why not?

Answer
A
Yes, because the lender estimated 3.08% of the home loan in closing costs which falls between 3 - 5%.
B
Yes, because the lender estimated 4.6% of the home loan in closing costs which does not fall between 3 - 5%.
C
No, because the lender estimated 6.2% of the home loan in closing costs which does not fall between 3 - 5%.
D
No, because the lender estimated 17.7% of the home loan in closing costs which does fall between 3 - 5%.

Explanation

Add the estimated costs: $200 + $530 + $600 + $265 + $575 + $130 + $800 = $3,100. Compared with the $50,000 loan, that is $3,100 ÷ $50,000 = 0.062, or 6.2%. Since 6.2% is above the usual 3–5% range, the costs are not a reasonable amount; choice C says this.

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