Question

A lender estimates that the closing costs on a $312,500 home loan will be $12,500. The actual closing costs were 4.25% of the loan amount. Determine if the closing costs were higher or lower than the estimate and by what percent.
a.
higher by 0.125%
b.
higher by 0.25%
c.
lower by 0.125%
d.
lower by 0.25%

Answer 1

Actual cost = 4.25% of 312,500 = 0.0425×312,500 = $13,281.25.
Difference = 13,281.25 − 12,500 = $781.25.
As a percent of the loan: 781.25 / 312,500 = 0.0025 = 0.25%.

So the closing costs were higher by 0.25% — answer b.