Question

A lender estimates the closing costs on a home loan will be 3% of the loan amount of $180,000. The actual closing costs are listed below. Closing Cost Charge Loan origination $345 Title insurance $600 Attorney's fees $1,350 Appraisal $480 Inspection $550 Recording fees $175 Escrow $1,900 Evaluate the lender's good faith estimate. A. The lender made an excellent estimate; it was equal to the actual closing costs. B. The lender made a very good estimate; it was within 0. 25% of the actual closing costs. C. The lender made a fairly good estimate; it was between 0. 25% and 0. 5% of the actual closing costs. D. The lender made a poor estimate; it was higher than 0. 5% of the actual closing costs. Please select the best answer from the choices provided A B C D.

Answer 1

Based on the information provided, it can be inferred that the lender made an excellent estimate; was equal to actual closing costs (option A)

How do you know what the lender's estimate was?

Based on the information provided, the lender estimated that the closing cost is equal to 3% of the $ 180,000 loan. To calculate that value we must do the following operation:

• $ 180,000 / 100 x 3% = $ 5,400.

Based on the above, the estimated closing cost for that loan is $ 5,400.

How to know the real cost of closing the loan?

To know the real cost of the loan closing we must add the following values:

• Closing Cost Charge Loan origination $ 345
• Title insurance $ 600
• Attorney's fees $ 1,350
• Appraisal $ 480
• Inspection $ 550
• Recording fees $ 175
• Escrow $ 1,900

$ 1,900 + $ 175 +% 550 + $ 480 + $ 1,350 + $ 600 + $ 345 = $ 5,400.

According to the above, the lender made a very precise estimate because his calculation hit the exact value of the closing cost (option A)

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