A buyer purchasing a 100,000 home has paid 12,000 as earnest money and has a loan commitment of 70 percent of the purchase price. How much additional cash must be brought to closing if there are no other closing costs?

A buyer purchasing a 100,000 home has paid 12,000 as earnest money and has a loan commitment of 70 percent of the purchase price. How much additional cash must be brought to closing if there are no other closing costs?

• A. 8,000
• B. 18,000
• C. 22,000
• D. 30,000

Answer: (B)

The amount needed at closing for the down payment is the portion of the price not covered by the loan. With a loan covering 70% of a 100,000 purchase, the down payment required is 30% of the price, which is 30,000. The buyer has already paid 12,000 as earnest money, and that amount is credited toward the down payment at closing. So the additional cash to bring is 30,000 minus 12,000, which equals 18,000. Since there are no other closing costs, 18,000 is the total cash to bring to the closing.

The amount needed at closing for the down payment is the portion of the price not covered by the loan. With a loan covering 70% of a 100,000 purchase, the down payment required is 30% of the price, which is 30,000. The buyer has already paid 12,000 as earnest money, and that amount is credited toward the down payment at closing. So the additional cash to bring is 30,000 minus 12,000, which equals 18,000. Since there are no other closing costs, 18,000 is the total cash to bring to the closing.