Mavis buys a home for $500,000 with 90% loan-to-value. She pays two discount points to reduce the rate from 5% to 4.75%. What is the total cash due at closing?

• A. 58,000
• B. 59,000
• C. 60,000
• D. 68,000

Answer: (B)

Cash due at closing includes the down payment plus any prepaid items like discount points. The loan amount is 90% of the purchase price, so 0.90 × 500,000 = 450,000. The down payment is the remainder: 500,000 − 450,000 = 50,000. Discount points are prepaid interest equal to 1% of the loan amount per point, so two points cost 2% × 450,000 = 9,000. Add these together: 50,000 + 9,000 = 59,000. Since no other closing costs are given, the total cash due at closing is 59,000. Discount points reduce the interest rate but are paid upfront, affecting the cash you bring to closing.