Question

# You plan to buy a house that has the sale price of \$180,000. A local bank...

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

The down payment=20%*sale price=20%*180,000=\$36,000

The loan amount=Sales price-down payment=\$180,000-\$36,000=\$144,000

The bank charges=2%*loan amount=2%*144,000=\$2,880

a. The upfront payment=down payment+bank charges=\$36,000+\$2,880=\$\$38,880

b. Monthly mortage payment formula=loan amount*monthly interest*(1+monthly interest)^n/[(((1+monthly interest)^n)-1)]

n=total number of periods=12*30=360

monthly interest=4%/12=0.3333%

Monthly mortage payment =144000*0.3333%*((1+0.3333%)^360)/[((1+0.3333%)^360)-1]

=480*3.3135/2.3135

=\$687.48

Monthly payment=\$687.48

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