If a buyer of a $125,000 home pays $2,000 in earnest money and has a loan commitment for 70% of the purchase price, what is the remaining cash needed to complete the transaction?

If a buyer of a $125,000 home pays $2,000 in earnest money and has a loan commitment for 70% of the purchase price, what is the remaining cash needed to complete the transaction?

• A. $3,500
• B. $35,500
• C. $37,000
• D. $37,500

Answer: (B)

To determine the remaining cash needed to complete the transaction, first calculate the total amount the buyer needs to provide upfront for the home purchase. The purchase price of the home is $125,000, and the buyer has a loan commitment for 70% of this amount. Calculating the loan amount involves multiplying the purchase price by the loan percentage: Loan Amount = $125,000 × 70% = $125,000 × 0.70 = $87,500 Next, subtract the loan amount from the total purchase price to find out how much cash is required to finalize the purchase: Cash Needed = Purchase Price - Loan Amount Cash Needed = $125,000 - $87,500 = $37,500 Since the buyer has already paid $2,000 in earnest money, the remaining cash needed after accounting for this payment can be established: Remaining Cash = Cash Needed - Earnest Money Remaining Cash = $37,500 - $2,000 = $35,500 The correct answer for the remaining cash required to complete the transaction, after accounting for the earnest money paid, is therefore $35,500. This calculation aligns with the provided information about the percentages and the available funds.

To determine the remaining cash needed to complete the transaction, first calculate the total amount the buyer needs to provide upfront for the home purchase.

The purchase price of the home is $125,000, and the buyer has a loan commitment for 70% of this amount. Calculating the loan amount involves multiplying the purchase price by the loan percentage:

Loan Amount = $125,000 × 70% = $125,000 × 0.70 = $87,500

Next, subtract the loan amount from the total purchase price to find out how much cash is required to finalize the purchase:

Cash Needed = Purchase Price - Loan Amount

Cash Needed = $125,000 - $87,500 = $37,500

Since the buyer has already paid $2,000 in earnest money, the remaining cash needed after accounting for this payment can be established:

Remaining Cash = Cash Needed - Earnest Money

Remaining Cash = $37,500 - $2,000 = $35,500

The correct answer for the remaining cash required to complete the transaction, after accounting for the earnest money paid, is therefore $35,500. This calculation aligns with the provided information about the percentages and the available funds.