Question

A lender estimates that the closing costs on a $165,000 home loan will be $6,187.50. The actual closing costs were 3.5% of the loan amount. Determine if the closing costs were higher or lower than the estimate and by what percent?
a.
higher by 0.25%
b.
higher by 0.5%
c.
lower by 0.25%
d.
lower by 0.5%

Answer 1

Estimate as percent: 6,187.50 / 165,000 = 0.0375 = 3.75%. Actual = 3.5%. So the actual closing costs were lower by 3.75% − 3.5% = 0.25%. Answer: c. lower by 0.25%.