A borrower must make a 10% down payment on a purchase transaction to qualify for the loan. The borrower made a $1,000 good faith deposit at the time of acceptance of the offer to purchase on a home sold for $172,000. The seller agreed to pay closing costs for up to 1% of the sales price. The buyer's closing costs totaled $2,100, and the broker is being paid one percent yield spread premium by the lender. How much more money does the buyer need to bring to closing?

A borrower must make a 10% down payment on a purchase transaction to qualify for the loan. The borrower made a $1,000 good faith deposit at the time of acceptance of the offer to purchase on a home sold for $172,000. The seller agreed to pay closing costs for up to 1% of the sales price. The buyer's closing costs totaled $2,100, and the broker is being paid one percent yield spread premium by the lender. How much more money does the buyer need to bring to closing?

• A. $16,200
• B. $16,580
• C. $17,920
• D. $8,920

Answer: (B)

The amount the buyer must bring to closing is the remaining down payment plus any closing costs the buyer must pay out of pocket, after considering credits from the seller. - Purchase price: 172,000 - Required down payment (10%): 17,200 - Good faith deposit already paid: 1,000 - Remaining down payment due at closing: 17,200 − 1,000 = 16,200 Closing costs total: 2,100 Seller will cover up to 1% of the sale price: 1,720 Remaining closing costs to be paid by the buyer: 2,100 − 1,720 = 380 Yield spread premium paid by the lender to the broker affects the loan pricing, not the buyer’s cash to close in this context, so it isn’t subtracted here. Total funds the buyer needs to bring to closing: 16,200 + 380 = 16,580.

The amount the buyer must bring to closing is the remaining down payment plus any closing costs the buyer must pay out of pocket, after considering credits from the seller.

• Purchase price: 172,000

• Required down payment (10%): 17,200

• Good faith deposit already paid: 1,000

• Remaining down payment due at closing: 17,200 − 1,000 = 16,200

Closing costs total: 2,100

Seller will cover up to 1% of the sale price: 1,720

Remaining closing costs to be paid by the buyer: 2,100 − 1,720 = 380

Yield spread premium paid by the lender to the broker affects the loan pricing, not the buyer’s cash to close in this context, so it isn’t subtracted here.

Total funds the buyer needs to bring to closing: 16,200 + 380 = 16,580.