Answer :
To determine if the lender's estimated closing costs are reasonable, we need to first calculate the total closing costs and then see what percentage they are of the home loan amount. Here's the step-by-step process:
1. Calculate the sum of the closing costs:
- Loan origination: [tex]$200 - Title insurance: $[/tex]530
- Attorney's fees: [tex]$600 - Appraisal: $[/tex]265
- Inspection: [tex]$575 - Recording fees: $[/tex]130
- Escrow: [tex]$800 Adding these amounts together gives: \[ 200 + 530 + 600 + 265 + 575 + 130 + 800 = 3100 \] Therefore, the total closing costs are $[/tex]\[tex]$3100$[/tex].
2. Calculate the percentage of the loan amount that the closing costs represent:
The home loan amount is [tex]$\$[/tex]50,000$.
[tex]\[ \text{Percentage of closing costs} = \left( \frac{3100}{50000} \right) \times 100 \][/tex]
Simplifying the fraction:
[tex]\[ \frac{3100}{50000} = 0.062 \][/tex]
Converting this to a percentage:
[tex]\[ 0.062 \times 100 = 6.2\% \][/tex]
Therefore, the closing costs are 6.2% of the home loan amount.
3. Compare the calculated percentage to the reasonable range:
Typically, reasonable closing costs are expected to fall within the range of 3% to 5% of the loan amount. Here, the calculated percentage of 6.2% is outside this range.
4. Determine the appropriateness based on the options:
Given these calculations, we can conclude that the correct answer is:
[tex]\[ \text{c. No, because the lender estimated 6.2\% of the home loan in closing costs which does not fall between 3 - 5\%.} \][/tex]
1. Calculate the sum of the closing costs:
- Loan origination: [tex]$200 - Title insurance: $[/tex]530
- Attorney's fees: [tex]$600 - Appraisal: $[/tex]265
- Inspection: [tex]$575 - Recording fees: $[/tex]130
- Escrow: [tex]$800 Adding these amounts together gives: \[ 200 + 530 + 600 + 265 + 575 + 130 + 800 = 3100 \] Therefore, the total closing costs are $[/tex]\[tex]$3100$[/tex].
2. Calculate the percentage of the loan amount that the closing costs represent:
The home loan amount is [tex]$\$[/tex]50,000$.
[tex]\[ \text{Percentage of closing costs} = \left( \frac{3100}{50000} \right) \times 100 \][/tex]
Simplifying the fraction:
[tex]\[ \frac{3100}{50000} = 0.062 \][/tex]
Converting this to a percentage:
[tex]\[ 0.062 \times 100 = 6.2\% \][/tex]
Therefore, the closing costs are 6.2% of the home loan amount.
3. Compare the calculated percentage to the reasonable range:
Typically, reasonable closing costs are expected to fall within the range of 3% to 5% of the loan amount. Here, the calculated percentage of 6.2% is outside this range.
4. Determine the appropriateness based on the options:
Given these calculations, we can conclude that the correct answer is:
[tex]\[ \text{c. No, because the lender estimated 6.2\% of the home loan in closing costs which does not fall between 3 - 5\%.} \][/tex]
