Question

1. A local developer is selling homes for $125,000 with a required down payment of 6%. Find the amount of the required down payment and the mortgage.

2. A couple obtained a loan for $130,000 to purchase their home. How much would the loan origination fee be if the couple had to pay 3 points on the loan. (Loan origination fee = Mortgage * Points).

3. New houses in a neighborhood are selling for $175,000. A down payment of $18,000 is required and a 25-year mortgage at an annual interest rate of 8% is available. Find the monthly mortgage payment.

4. The monthly mortgage payment on a house is $824.36, and the homeowner must pay an annual property tax of $930. Find the total monthly payment for the mortgage and the property tax.

Answer 1

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1)

Down payment = selling price * 6%

Down payment = 125000 * 0.06

Down payment = 7500

Mortgage = selling price - down payment

Mortgage = 125000 - 7500

Mortgage = 117500

2) (Points is a term used to represent a percentage)

Loan origination fee = Mortgage * Points

Loan origination fee = 130000 * 0.03

Loan origination fee = 3900

3)

Selling price = 175000

Down payment = 18000

Interest rate = 8% = 0.08

Time = 25 years = 300 months (25 * 12)

First, we will compute the total interest for the loan,

I = P * R * T = (175000 - 18000)(0.08)(25) = (157000)(0.08)(25)

I = 314000

Next, compute the maturity value which is the principal plus the interest

M = P + I

M = 157000 + 314000

M = 471000

Now, compute the monthly payment by dividing the maturity value by the number of months in the loan.

Monthly payment = M /300 = 471000 /300

Monthly payment = 1570

d)

Monthly property tax = Annual property tax / 12 = 930 /12

Monthly property tax = 77.50

Total monthly payment = monthly mortgage + monthly property tax = 824.36 + 77.50

Total monthly payment = 901.86