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Go and buy that house for 400,000, put down 10% upfront, finance it at 4% fixed for 30years. a)what is the monthly principle and interest? b)if real estate taxes are $12000 per year and annual insurance is $1200 per year, what is you total monthly mortgage (PITI)?

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Deanna Hettinger
Deanna HettingerLv2
28 Sep 2019

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You are buying a house and will borrow $210,000 on a 25-year fixed rate mortgage with monthly payments to finance the purchase. Your loan officer has offered you a mortgage with an APR of 4.40 percent. Alternatively, she tells you that you can “buy down” the interest rate to 4.15 percent if you pay points upfront on the loan. A point on a loan is 1 percent (one percentage point) of the loan value.

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You are buying a house and will borrow $225,000 on a 30-year fixed rate mortgage with monthly payments to finance the purchase. Your loan officer has offered you a mortgage with an APR of 4.55 percent. Alternatively, she tells you that you can “buy down” the interest rate to 4.35 percent if you pay points upfront on the loan. A point on a loan is 1 percent (one percentage point) of the loan value.

What are the most points you would be willing to pay to buy down the interest rate? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.164.

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Buying a House

2) After you've been working five years, you decide to buy a house. As a rule of thumb, your house payments should not exceed 25% of your gross pay. Based on your annual salary during your sixth year on the job $42, 543, what is the maximum amount you could afford in the house payments per year?

3) Calculate the maximum house payment you could afford per month?

4) Assume you will qualify for an 8%, 30-year conventional mortgage. How much could you borrow based on the maximum monthly payment you can afford? (8% compounded monthly)

5) Lenders often expect that you have 20% of the value of the house as a down payment. Assume that you will be able to make a 20% down payment. What is a total cost of the house you could afford? The total cost is equal to the mortgage plus the down payment. (HINT: Use algebra. You want to calculate 20% of the value of the house, not 20% of the amount you are financing.)

6)What is the amount you would pay for for this house over the 30-year mortgage with monthly payments? Don't forget to include the down paument. (In the words, how much total cash will you be paying for this house - not taking into account the time value of money?)

7) How large would your monthly payments be if you could qualify for a 2-year mortgage at 8% compounded monthly (for the same amount you could borrow based on your calculations in question 4)?

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