Question 120 • ****Spring 2026 Financial Math - MA2007 MQS21QXV
A lender estimates the closing costs on a home loan will be 3% of the loan amount of $180,000. The actual closing costs are listed below. Closing Cost Charge Loan origination $345 Title insurance $600 Attorney's fees $1,350 Appraisal $480 Inspection $550 Recording fees $175 Escrow $1,900 Evaluate the lender's good faith estimate.
Answer
A
The lender made an excellent estimate; it was equal to the actual closing costs.
B
The lender made a very good estimate; it was within 0.25% of the actual closing costs.
C
The lender made a fairly good estimate; it was between 0.25% and 0.5% of the actual closing costs.
D
The lender made a poor estimate; it was higher than 0.5% of the actual closing costs.
Explanation
The lender’s estimate is 3% of $180,000, which is $5,400. Adding the listed actual costs gives $345 + $600 + $1,350 + $480 + $550 + $175 + $1,900 = $5,400. Since the estimate exactly equals the actual closing costs, the correct choice is a: the lender made an excellent estimate.
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