California Real Estate Practice Exam

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Prepare for the California Real Estate Exam. Study with flashcards and multiple-choice questions, each question includes hints and explanations. Get ready to ace your exam!

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A buyer purchased a residence for $225,000, with 12% down, and the seller is taking back a note and T.D. for the balance, payable at 12% per annum. Monthly payments were to be $520 principal plus interest. Taxes are $2,700 per year and hazard insurance is $804 per year. What will be the buyer's 1st monthly payment plus monthly amounts for the impound account for taxes and insurance?

$2,927
$2,972
$2,792
$2,279

The correct answer is: $2,927

To determine the buyer's first monthly payment, including the amounts for the impound account for taxes and insurance, we begin by calculating each component separately. First, let's assess the purchase price of the residence at $225,000 with a down payment of 12%. The down payment would be: \[ 225,000 \times 0.12 = 27,000 \] This means the principal balance to be financed after the down payment is: \[ 225,000 - 27,000 = 198,000 \] Next, the monthly payments agreed upon are $520 for principal repayment, and we need to add the interest component to this. The loan amount is $198,000 at a 12% annual interest rate, which means the monthly interest rate is 1% (12% divided by 12 months). The interest for the first month will thus be: \[ 198,000 \times 0.01 = 1,980 \] So, the total monthly payment for principal and interest will be: \[ 520 + 1,980 = 2,500 \] Now, we also need to calculate the amounts for taxes and hazard insurance. The property taxes are given at