A buyer agrees to purchase a property for $400,000. The buyer pays a $500 option fee and deposits $10,000 in earnest money. The buyer obtains a conventional loan for 80% of the purchase price. At closing, how much additional cash must the buyer bring (excluding closing costs)?
Correct Answer
D) $69,500
Down payment = $400,000 × 20% = $80,000. Credits: Option fee credit = $500 + Earnest money credit = $10,000. Total credits = $10,500. Additional cash needed = $80,000 - $10,500 = $69,500.
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Related Topics & Key Terms
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Related Concepts
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
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