1. A loan with the following terms is being made: Fixed rate, constant monthly payment. Closing date February 9th 9% interest rate. Prepaid interest due at closing. $70,000 mortgage loan amount $1,500 loan discount points to be paid by the buyer/borrower to the lender. 25-year term, monthly payments, fully amortizing. a. Calculate the APR for federal truth-in-lending purposes. b. Do you think that the APR calculated in (a) reflects the likely return that the lender will receive over the term of the loan? List specific reasons that the lender's actual return might be different from the APR. c. A potential home buyer is wondering about her credit card accounts and the effect that they may have on her credit score which will be evaluated when she applies for a mortgage loan. At present, she has 3 accounts with credit limits and balances outstanding as follows: which will be evaluated when she applies for a mortgage loan. At present, she has 3 accounts with credit limits and balances outstanding as follows: Account Limit Outstanding Balance |(1) $ 5,000 $3,000 10,000 (2) 5,000 (3) 15,000 8,000 She would like to transfer the balance in account #2 to account #3 in order to save the membership fee and because the interest charges for account #2 are higher than the others. If she does this account # 2 would be closed. (a) How much credit capacity is she currently using? (b) If she cancels account #2 and transfers the balance to account #3, what will be the capacity used now? (c) After the transfer, how much would an increase in the total credit limit have to be in account #3 to restore the total capacity used in all accounts prior to the transfer? 1. A loan with the following terms is being made: Fixed rate, constant monthly payment. Closing date February 9th 9% interest rate. Prepaid interest due at closing. $70,000 mortgage loan amount $1,500 loan discount points to be paid by the buyer/borrower to the lender. 25-year term, monthly payments, fully amortizing. a. Calculate the APR for federal truth-in-lending purposes. b. Do you think that the APR calculated in (a) reflects the likely return that the lender will receive over the term of the loan? List specific reasons that the lender's actual return might be different from the APR. c. A potential home buyer is wondering about her credit card accounts and the effect that they may have on her credit score which will be evaluated when she applies for a mortgage loan. At present, she has 3 accounts with credit limits and balances outstanding as follows: which will be evaluated when she applies for a mortgage loan. At present, she has 3 accounts with credit limits and balances outstanding as follows: Account Limit Outstanding Balance |(1) $ 5,000 $3,000 10,000 (2) 5,000 (3) 15,000 8,000 She would like to transfer the balance in account #2 to account #3 in order to save the membership fee and because the interest charges for account #2 are higher than the others. If she does this account # 2 would be closed. (a) How much credit capacity is she currently using? (b) If she cancels account #2 and transfers the balance to account #3, what will be the capacity used now? (c) After the transfer, how much would an increase in the total credit limit have to be in account #3 to restore the total capacity used in all accounts prior to the transfer
