Question

The remaining Application Exercises deal with purchasing a
house. Assume that you are currently renting an apartment for
$1,040 per month and you have been considering buying a house. You
have saved $10,000 towards a down payment for the house.

A salesperson informs you that he has a new house for sale, where
the house and land were independently appraised at $200,000, but
are being sold by the builderatadiscountpriceof
$185,000.Thebuilderwantstogetridofthepropertyquicklybecausethehouseisthelastonetobesoldinthedevelopmentand
the builder is moving on to construction of a new
development.

The salesperson connects you with his in-house lender, to whom you
give details about your income and grant permission to review your
credit and eligibility for a loan. You inform her that you are
prepared to make a down payment of $10,000 towards the house if
necessary. She gets back to you with good news that, if you put
$8,100 towards the house, then they can give you a 30-year loan for
the balance of $176,900 at 6.25% per annum (compounded monthly).
Note that lenders require the house to appraise at or above the
purchase price; otherwise, they may reject the loan or require more
down payment. The lender computes the monthly mortgage payment at
$1,089.20. She informs you that the remaining $1,900 of your
$10,000 can be used towards costs associated with the ﬁnal
evaluation of the physical property and the closing of the purchase
(property inspector fee, termite inspector fee, ofﬁcial survey,
attorney fees, etc.) The builder agrees to pay for costs beyond
your $1,900 and make necessary repairs you identify during the
period you have to inspect the property (the due diligence
period).

Hearing the news about your qualiﬁcation for the loan, the
salesperson asks you how much rent you are now paying. When you
inform him that you pay $1,040 per month, he quickly points out
that it would be a mere extra $50 per month for you to meet the
mortgage payments. He emphasizes that it is better
toownthantorent,especiallyifthemortageisjustabitmorethanyourcurrent
rent.

You are thrilled! After the excitement subsides, however, you
decide to run the numbers yourself to make sure you get a clear
understanding of what you are getting into ﬁnancially.19 The
problems in this project help guide you through some of this
analysis.

Show that the monthly loan payment on the unpaid principal balance of $176,900 is $1,089.20.

Answer #1

Given in the question to proove monthly loan payment of the unpaid principal balance of $176,900 is $1,089.20 | ||||

Also given in the question the is for a period of 30 years(i.e., 360 months) @ 6.25% per annum(compounded monthly) | ||||

Equated Installment formula is | {P*[i*((1+i)^n)]}/((1+i)^n)-1 | |||

Where P equals to Principal amount to be collected | ||||

And I is the discount rate , n is no. of installments | ||||

In our Question P= $176,900; i = 0.520833% monthly (i.e., 6.25% Annually); n= 360 | ||||

Therefore Equated Annual installment is | (176900*(0.00520833*((1+0.00520833)^360)))/(((1+0.00520833)^360)-1) | |||

Which equals to | 1089.20 | |||

therefore the monthly loan
payment of the unpaid principal balance of $176,900 is
$1,089.20 |

You friend Stephen is planning to buy a house. He believes he
can afford a mortgage payment of $3,750 per month. The current
interest rate on a 30 year mortgage is 3.25% per year. What is the
largest mortgage he can afford based on a 30 year loan if the
lender requires a 20% downpayment? How much does he need in down
payment for the most expensive house he can afford? ]

You want to buy your dream house. You currently have $15,000
saved and you need to have a 10% down payment plus an additional 5%
of the loan amount for closing costs. Assume the cost of the house
is $956,216. You can earn 7.5% per year in a savings account per
year. How long will it be before you have enough money for the down
payment and closing costs?
Given your current credit, you secure a 15-year fixed rate
mortgage...

Suppose you take a 10-year mortgage for a house that costs
$207,304. Assume the following:
The annual interest rate on the mortgage is 3.7%.
The bank requires a minimum down payment of 7% of the cost of
the house.
The annual property tax is 1.7% of the cost of the house.
The annual homeowner's insurance is $529.
The monthly PMI is $60.
Your other long-term debts require payments of $1,489 per
month.
If you make the minimum down payment, what...

Suppose you take a 10-year mortgage for a house that costs
$231,675. Assume the following: The annual interest rate on the
mortgage is 3.8%. The bank requires a minimum down payment of 14%
of the cost of the house. The annual property tax is 1.6% of the
cost of the house. The annual homeowner's insurance is $825. The
monthly PMI is $98. Your other long-term debts require payments of
$1,607 per month. If you make the minimum down payment, what...

Suppose you take out a 30-year mortgage for a house that costs
$496,845. Assume the following:
The annual interest rate on the mortgage is 3.9%.
The bank requires a minimum down payment of 16% at the time of
the loan.
The annual property tax is 2.1% of the cost of the house.
The annual homeowner's insurance is 0.6% of the cost of the
house.
There is no PMI
If you make the minimum down payment, what will your monthly
PITI...

You plan to buy a house that has the sale price of $180,000. A
local bank can offer you a conventional 30-year mortgage with 20%
down payment and 4% APR. The bank also charge you 2% fees off the
loan amount, including origination fee, document fee and etc. How
much would be your upfront payment and monthly mortgage payment
(a) Upfront payment
(b) Monthly mortgage payment

Assume you are looking to buy a house $200,000 with a 20-year
mortgage at 12%, estimate the monthly mortgage payment. How much
money from the monthly payment goes towards equity in the first
month? Second month?

You have purchased a freehold house (i.e., no condo fee) for
$300,000 with 20% down payment and the rest borrowed from your
local bank as a 30-year mortgage loan at 6% (APR with monthly
compounding). The mortgage can be paid off any time without
penalty, i.e., it allows prepayment.
(a) (1 point) What is your loan to
value (LTV) ratio?
(b) (2 points) What is your monthly
payment?
(c) (1 point) If your gross annual
income is...

You are planning to purchase a house for $180,000. You will pay
20% down payment and take a mortgage loan for the remaining 80%.
You could get a 3/1 ARM amortized over 15 years at 3.9 % or a fixed
15 year FRM loan at 5.3%. The expected interest rate of the ARM
from years 4 to 5 is 7.5%. You will live in the house for five
years, and after that you expect to sell the house for $200,000...

Your monthly income is $10,000 per month. Your mortgage payment
is $1600, student loan payments are $500, car payments are $400 and
credit card payments (paying down a credit card debt) are $1000.
You are thinking of taking out a home equity loan to remodel your
house. In order to keep your debt to income ratio below 36%, what
is highest monthly payment you could afford on the home equity
loan? If the term of the loan is 5 years...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 2 minutes ago

asked 2 minutes ago

asked 3 minutes ago

asked 8 minutes ago

asked 9 minutes ago

asked 12 minutes ago

asked 36 minutes ago

asked 57 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago