Jason Bradley’s uncle, Maurice, is buying a $248,500 home in Mississippi. His mortgage lender requires a 20% down payment and will finance the remainder for 30 years at 5%. Closing costs will be 1% origination fee, 1 ¼ point, mortgage insurance premium of $2,400. Other loan costs will include a pest inspection fee of $175, appraisal fee of $295, credit report fee of $80, title insurance premium of $320, and recording fees of $65. There will also be money collected for the escrow account in the amount of $875. What is the reportable APR? Round to the nearest hundredth percent.
Cost of the property = $248,500
Down payment = 20% of the cost = $49,700
Total loan amount = 248500-49700 =$ 198,800
APR calculation
Finance charge = 5%
Other charges
Closing cost = 1%*198800 = 1988
origination fee = 1.25%*198800= 2485mortgage insurance = 2400
pest inspection fee = 175
appraisal fee= 295
credit report fee = 80
title insurance premium = 320
recording fees = 65
escrow account = 875
Total charges = 8683
8683/(198800*30)*100= .145%
Finance charge = 5%
APR =5.145%
(Assumimg it as a simple interest)
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