Question

Jason Bradley’s uncle, Maurice, is buying a $248,500 home in Mississippi. His mortgage lender requires a...

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.

Homework Answers

Answer #1

Cost of the property = $248,500

Down payment = 20% of the cost = $49,700

Total loan amount = 248500-49700 =$ 198,800

APR calculation

  1. Divide the finance charge by the loan amount.
  2. Multiply the result by 365.
  3. Divide the result by the term of the loan.
  4. Multiply the result by 100.

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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