Question

a buyer has made an earnest money deposit of $6,500 on a house selling for $112,500. a lender has agreed to lend 85 percent of the purchase price at 6 percent interest for 30 years. if the buyer's closing costs amount to $4,375, how much additional cash must the buyer bring to closing?

Answer 1

The  additional cash must the buyer bring to closing is $14,750

What is the total cash required by the buyer at closing?

The total cash required by the buyer at closing is the buyer's closing costs plus down payment which is 15% of the house selling price.

The down payment required is 15% because the lender has agreed to lend 85% of the asset value as the mortgage, hence, down payment is computed thus:

down payment=15%*$112,500

down payment=$16,875

total cash needed=$16,875+$4,375

total  cash needed=$21,250

additional cash required=total cash needed-cash saved

additional cash required=$21,250-$6,500

additional cash required=$14,750

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