Math / Data & Statistics

QuestionA lender estimates the closing costs on a home loan of $\$ 50,000$ as listed below. \begin{tabular}{|c|c|} \hline Closing Cost & Charge \\ \hline Loan origination & $\$ 200$ \\ \hline Title insurance & $\$ 530$ \\ \hline Attorney's fees & $\$ 600$ \\ \hline Appraisal & $\$ 265$ \\ \hline Inspection & $\$ 575$ \\ \hline Recording fees & $\$ 130$ \\ \hline Escrow & $\$ 800$ \\ \hline & \\ \hline \end{tabular}
If the lender's good faith estimates are accurate, are they a reasonable amount for closing costs? Why or why not? a. Yes, because the lender estimated $3.08 \%$ of the home loan in closing costs which falls between 3 - 5\%. b. Yes, because the lender estimated $4.6 \%$ of the home loan in closing costs which does not fall between $3-5 \%$ . c. No, because the lender estimated $6.2 \%$ of the home loan in closing costs which does not fall between 3 - 5\%. d. No, because the lender estimated $17.7 \%$ of the home loan in closing costs which does fall

Studdy Solution

STEP 1

What is this asking? Are the estimated closing costs on a $\$50,000$ loan, totaling $\$200 + \$530 + \$600 + \$265 + \$575 + \$130 + \$800$ , within the reasonable range of 3% to 5% of the loan amount? Watch out! Don't forget to convert the percentage to a dollar amount to compare it with the sum of closing costs!
Also, make sure to accurately calculate the total closing costs.

STEP 2

1. Calculate Total Closing Costs
2. Calculate Percentage of Closing Costs
3. Check if the Percentage is Reasonable

STEP 3

Let's add up all the individual closing costs to find the total closing costs.
This is like gathering all the puzzle pieces before we put them together! $\$200 + \$530 + \$600 + \$265 + \$575 + \$130 + \$800 = \$3100$ So, the total estimated closing costs are $\$3100$ .

STEP 4

Now, we'll divide the total closing costs by the loan amount to find out what percentage of the loan the closing costs represent.
Think of it like figuring out what slice of the pie the closing costs take up! $\frac{\$3100}{\$50000} = 0.062$

STEP 5

To express this as a percentage, we'll multiply by $100$ . $0.062 \cdot 100 = 6.2\%$ So, the closing costs represent $\boldsymbol{6.2\%}$ of the home loan.

STEP 6

The problem states that a reasonable range for closing costs is between $3\%$ and $5\%$ of the loan amount.
Our calculated percentage, $\boldsymbol{6.2\%}$ , is outside this range.
It's higher than the upper limit of $5\%$ .

STEP 7

The answer is (c).
No, because the lender estimated $6.2\%$ of the home loan in closing costs, which does not fall between $3$ - $5\%$ .

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Studdy Solution

STEP 1

STEP 2

1. Calculate Total Closing Costs
2. Calculate Percentage of Closing Costs
3. Check if the Percentage is Reasonable

STEP 3

Let's add up all the individual closing costs to find the total closing costs.
This is like gathering all the puzzle pieces before we put them together! $\$200 + \$530 + \$600 + \$265 + \$575 + \$130 + \$800 = \$3100$ So, the total estimated closing costs are $\$3100$ .

STEP 4

Now, we'll divide the total closing costs by the loan amount to find out what percentage of the loan the closing costs represent.
Think of it like figuring out what slice of the pie the closing costs take up! $\frac{\$3100}{\$50000} = 0.062$

STEP 5

To express this as a percentage, we'll multiply by $100$ . $0.062 \cdot 100 = 6.2\%$ So, the closing costs represent $\boldsymbol{6.2\%}$ of the home loan.

STEP 6

The problem states that a reasonable range for closing costs is between $3\%$ and $5\%$ of the loan amount.
Our calculated percentage, $\boldsymbol{6.2\%}$ , is outside this range.
It's higher than the upper limit of $5\%$ .

STEP 7

The answer is (c).
No, because the lender estimated $6.2\%$ of the home loan in closing costs, which does not fall between $3$ - $5\%$ .

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Studdy Solution

STEP 1

STEP 2

1. Calculate Total Closing Costs2. Calculate Percentage of Closing Costs3. Check if the Percentage is Reasonable

STEP 3

STEP 4

Now, we'll **divide** the **total closing costs** by the **loan amount** to find out what **percentage** of the loan the closing costs represent.Think of it like figuring out what slice of the pie the closing costs take up! $3100$50000=0.062\frac{\$3100}{\$50000} = 0.062$50000$3100​=0.062

STEP 5

To express this as a **percentage**, we'll **multiply** by 100100100. 0.062⋅100=6.2%0.062 \cdot 100 = 6.2\%0.062⋅100=6.2% So, the closing costs represent 6.2%\boldsymbol{6.2\%}6.2% of the home loan.

STEP 6

The problem states that a reasonable range for closing costs is between 3%3\%3% and 5%5\%5% of the loan amount.Our calculated percentage, 6.2%\boldsymbol{6.2\%}6.2%, is *outside* this range.It's higher than the upper limit of 5%5\%5%.

STEP 7

The answer is (c).No, because the lender estimated 6.2%6.2\%6.2% of the home loan in closing costs, which does not fall between 333-5%5\%5%.

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1. Calculate Total Closing Costs
2. Calculate Percentage of Closing Costs
3. Check if the Percentage is Reasonable

Now, we'll divide the total closing costs by the loan amount to find out what percentage of the loan the closing costs represent.
Think of it like figuring out what slice of the pie the closing costs take up! $\frac{\$3100}{\$50000} = 0.062$

To express this as a percentage, we'll multiply by $100$ . $0.062 \cdot 100 = 6.2\%$ So, the closing costs represent $\boldsymbol{6.2\%}$ of the home loan.

The problem states that a reasonable range for closing costs is between $3\%$ and $5\%$ of the loan amount.
Our calculated percentage, $\boldsymbol{6.2\%}$ , is outside this range.
It's higher than the upper limit of $5\%$ .

The answer is (c).
No, because the lender estimated $6.2\%$ of the home loan in closing costs, which does not fall between $3$ - $5\%$ .