SETUP: Four hundred households receive mortgage loans from Packer Bank to buy homes. The buyers have...

SETUP: Four hundred households receive mortgage loans from Packer Bank to buy homes. The buyers have an annual gross income of $45,000 and borrow $100,000 on a 30-year fixed rate loan of 6 percent. The annual real estate taxes and annual homeowners insurance premiums are $2,400 and $900, respectively. The borrowers also receive guarantees from the Federal Housing Administration (FHA). Packer Bank securitizes all the loans and sells them as GNMA mortgage pass-through securities to Titan Investments.

1. What is the monthly loan principal & interest payment (to two decimal places)? Also, complete the timeline and financial calculator box needed to solve this problem.

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Enter
	N	I/Y	PV	PMT	FV
Solve for

2. What would be the PITI for each loan (to two decimal places)? Show your work.

3. What would be the front-end ratio for each loan (to two decimal places in percent)? Show your work and explain if the ratio is satisfactory.

Expert Solution

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jeff jeffy answered 2 years ago

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