A buyer purchases a home for $325,000 with a $400 option fee and $8,000 earnest money. The buyer obtains an FHA loan at 96.5% LTV. The option fee and earnest money are credited at closing. What is the buyer's required down payment at the closing table (excluding closing costs)?
Correct Answer
B) $2,975
FHA down payment = $325,000 × 3.5% = $11,375. Credits at closing: Option fee = $400 + Earnest money = $8,000 = $8,400 total. Additional cash = $11,375 - $8,400 = $2,975.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
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