AnswersFinancial Math - MA2007Topic TestQuestion 126
126
QuizMultiple Choice

Topic Test

Question 126 • Financial Math - MA2007

A lender estimates the closing costs on a home loan of $90,000 as listed below. Closing Cost Charge Loan origination $180 Title insurance $365 Attorney’s fees $795 Inspection $300 Recording fees $120 Escrow $980 The actual closing costs were: Closing Cost Charge Loan origination $180 Title insurance $340 Attorney’s fees $830 Inspection $375 Recording fees $150 Escrow $1,000 Evaluate the lender's good faith estimate as a percentage of the loan amount.

Answer
A
The lender made a very good estimate; it was within 0.25% of the actual closing costs.
B
The lender made a fairly good estimate; it was between 0.25% and 0.5% from the actual closing costs.
C
The lender made a somewhat poor estimate; it was between 0.25% and 0.5% from the actual closing costs.
D
The lender made a very poor estimate; it was between 0.5% and 0.75% from the actual closing costs.

Explanation

The estimated costs total $2,740, while the actual costs total $2,875, so the estimate was $135 below the actual amount. As a percentage of the $90,000 loan, the difference is ($135 ÷ $90,000) × 100 = 0.15%. Since 0.15% is within 0.25%, the lender made a very good estimate.

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