In the scenario, with a sale price of 160,000, earnest money 5,000, option money 2,000 credited at closing, and a 20% down payment, how much will be required toward the down payment at closing?

In the scenario, with a sale price of 160,000, earnest money 5,000, option money 2,000 credited at closing, and a 20% down payment, how much will be required toward the down payment at closing?

• A. 30,000
• B. 25,000
• C. 32,000
• D. 27,000

Answer: (B)

The main idea is that the down payment is a percentage of the purchase price, and any upfront funds that will be credited toward the down payment at closing reduce the cash you need to bring. Calculate 20% of the sale price: 0.20 × 160,000 = 32,000. Earnest money and the option money are credits toward the down payment at closing: 5,000 + 2,000 = 7,000. Subtract the credits from the required down payment: 32,000 − 7,000 = 25,000. So, 25,000 would be required toward the down payment at closing.

The main idea is that the down payment is a percentage of the purchase price, and any upfront funds that will be credited toward the down payment at closing reduce the cash you need to bring.

Calculate 20% of the sale price: 0.20 × 160,000 = 32,000.

Earnest money and the option money are credits toward the down payment at closing: 5,000 + 2,000 = 7,000.

Subtract the credits from the required down payment: 32,000 − 7,000 = 25,000.

So, 25,000 would be required toward the down payment at closing.