Affiliate Broker Tennessee (TN PSI) National Practice Exam `

If Nico purchases a home for $625,000 with an earnest money deposit of 8%, how much money should he bring to closing if his closing costs are 5% of the purchase price?

1. $106,250

2. $125,000

3. $98,000

4. $85,000

The correct answer is: $106,250

To determine how much money Nico should bring to closing, the calculation involves a few key components: the earnest money deposit and the closing costs. First, calculate the earnest money deposit. Nico's deposit is 8% of the purchase price of $625,000. The calculation for the earnest money deposit is as follows: \[ \text{Earnest Money Deposit} = 0.08 \times 625,000 = 50,000 \] Next, calculate the closing costs, which are 5% of the purchase price. This calculation looks like: \[ \text{Closing Costs} = 0.05 \times 625,000 = 31,250 \] Now, to find out how much Nico needs to bring to closing, we need to subtract the earnest money deposit from the total money required at closing (which consists of the purchase price and closing costs). Since he has already deposited a part of the money (the earnest money), the total funds needed at closing will include the closing costs minus the earnest money deposit: \[ \text{Total Funds Needed} = \text{Closing Costs} = 31,250 \] \[ \text{Amount to bring to closing} =