Question

You are a loan officer at the West Elm Savings and Loan. Mr. and Mrs. Brady are in your office to apply for a mortgage loan on a house they want to buy. The house has a market value of $160,000. Your bank requires 1/5 of the market value as a down payment.
(a)
What is the amount (in $) of the down payment? $


(b)
What is the amount (in $) of the mortgage for which the Bradys are applying? $


(c)
Your bank offers the Bradys a 30-year mortgage with a rate of 5%. At that rate, the monthly payments for principal and interest on the loan will be $5.37 for every $1,000 financed. What is the amount (in $) of the principal and interest portion of the Bradys' monthly payment? $


(d)
What is the total amount (in $) of interest that will be paid over the life of the loan? $


(e)
Your bank also requires that the monthly mortgage payments include property tax and homeowners insurance payments. If the property tax is $1,710 per year and the property insurance is $1,458 per year, what is the total monthly payment (in $) for PITI (principal, interest, taxes, and insurance)? $


(f)
To qualify for the loan, bank rules state that mortgage payments cannot exceed 14 of the combined monthly income of the family. If the Bradys earn $3,750 per month, will they qualify for this loan?


Yes, they will http://qualify.
No, they will not qualify.


(g)
What monthly income (in $) would be required to qualify for this size mortgage payment? $

Answer 1

a) The amount (in $) of the down payment is $32,000.

b) The amount (in $) of the mortgage for which the Bradys are applying is $128,000.

c) The amount (in $) of the principal and interest portion of the Bradys' monthly payment, at $5.37 for every $1,000 financed, is $687.36.

d) The total amount (in $) of interest that will be paid over the life of the loan is $$119,449.60.

e) The total monthly payment (in $) for PITI (principal, interest, taxes, and insurance) is $951.36.

f) Based on the bank rules that state that mortgage payments cannot exceed 14% of the combined monthly income of $3,750, B. No, they will not qualify.

(g) The monthly income (in $) that would be required to qualify for this size mortgage payment is $4,909.71 ($687.36/0.14).

Data and Calculations:

Down payment = 1/5 or 20%

Home Price = $160,000

Down Payment = 20%

Loan Term = 30 years

Interest Rate = 5%

Annual property tax = $1,710 per year

Annual property insurance = $1,458 per year

Monthly taxes and insurance = $264 ($3,168/12)

Monthly PITI (principal, interest, taxes, and insurance) = $951.36 ($264 + $687.36)

14% of $3,750 = $525

Results:  

Monthly Pay:   $687.36 ($5.37 x $128,000/$1,000)

Loan Amount $128,000 ($160,000 - $32,000)

Down Payment = $32,000 ($160,000 x 20%)

Total of 360 Mortgage Payments = $247,449.60 ($687.36 x 360)

Total Interest = $119,449.60 ($247,449.60 - $128,000)

Learn more about mortgage payments at brainly.com/question/1318711

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