3. The benefits and costs of home ownership - Part 2 How Should the Costs of Purchasing and Owning a Home Be Categorized? You can categorize the costs associated with home ownership according to whether they are paid at closing, or monthly throughout the life of the mortgage loan, or even after the home is paid off. Consider the following situation, and then complete the form that follows by entering the necessary data, classifying the costs according to whether they represent up-front, monthly costs, or both. Finally, answer the associated questions that follow. Note: Round all dollar amounts to the nearest whole dollar, and if no payment is necessary, record a zero (0) in the space. In case of deduction, enter the dollar amount without minus sign. When Should David Pay Housing Costs? On April 1 of next year, David is purchasing a $210,000 condominium and has accepted the Fifth State Bank's offer of a ten-year $182,700 loan with an interest rate of 10%. He has a gross annual income of $70,000 and is concerned about how much his one-time up-front costs and recurring monthly costs will be. He's received the following data and form, but he's not certain when he is to pay each cost-at closing, monthly, or both. Your task is to help David by completing the form and classifying the costs. Hint: Remember that the purchase is expected to close on the first of April. This means the following: Although a year's worth of a cost, such as the condominium's property taxes, may be owed by the home buyer, a portion of the total cost will be paid by the seller. . A portion of a cost, such as the homeowner's insurance premium, may be deposited into an escrow account so that the accumulated funds will be available to pay the entire annual premium when it is due next year. For its mortgage, the bank will permit a 13% down payment but will also require 3 points. Mortgage insurance is required if the loan-to-value (LTV) ratio is less than 20%. A private mortgage insurance (PMI) policy, if necessary, is expected to cost $731 per year, but is distributed 12 times per year. David has purchased a home warranty policy, which carries an annual premium of $480 and is paid 12 times per year, and a homeowner's insurance policy, which costs $2,100 per year. Premiums for these two policies are paid to the respective insurance companies from an escrow account at the bank. Credit report fee: $85 Title search and deed recording fee: $420 Loan origination fee: $900 . Titie insurance policy-Lender: $375 . Mortgage payment (principal and interest): $2,410 Appraisal and survey fees: $600 Attorney fees: $1,050 Home, termite, and radon Inspections: $575 Title insurance policy-Homeowner: $450 Messenger and document fees: $315 Property taxes on the condominium: $15,750 per year . The property taxes and homeowner's policy should be pro-rated. Cost Incurred Amount Paid At Closing Monthly $ $ $ $ $ $ $ Using the given information, what is the loan-to-value (LTV) ratio required by the Fifth State Bank? 87.00% 13.00% 114.94% of his mortgage, and his monthly costs are of David's total closing costs are monthly income. 3. The benefits and costs of home ownership - Part 2 How Should the Costs of Purchasing and Owning a Home Be Categorized? You can categorize the costs associated with home ownership according to whether they are paid at closing, or monthly throughout the life of the mortgage loan, or even after the home is paid off. Consider the following situation, and then complete the form that follows by entering the necessary data, classifying the costs according to whether they represent up-front, monthly costs, or both. Finally, answer the associated questions that follow. Note: Round all dollar amounts to the nearest whole dollar, and if no payment is necessary, record a zero (0) in the space. In case of deduction, enter the dollar amount without minus sign. When Should David Pay Housing Costs? On April 1 of next year, David is purchasing a $210,000 condominium and has accepted the Fifth State Bank's offer of a ten-year $182,700 loan with an interest rate of 10%. He has a gross annual income of $70,000 and is concerned about how much his one-time up-front costs and recurring monthly costs will be. He's received the following data and form, but he's not certain when he is to pay each cost-at closing, monthly, or both. Your task is to help David by completing the form and classifying the costs. Hint: Remember that the purchase is expected to close on the first of April. This means the following: Although a year's worth of a cost, such as the condominium's property taxes, may be owed by the home buyer, a portion of the total cost will be paid by the seller. . A portion of a cost, such as the homeowner's insurance premium, may be deposited into an escrow account so that the accumulated funds will be available to pay the entire annual premium when it is due next year. For its mortgage, the bank will permit a 13% down payment but will also require 3 points. Mortgage insurance is required if the loan-to-value (LTV) ratio is less than 20%. A private mortgage insurance (PMI) policy, if necessary, is expected to cost $731 per year, but is distributed 12 times per year. David has purchased a home warranty policy, which carries an annual premium of $480 and is paid 12 times per year, and a homeowner's insurance policy, which costs $2,100 per year. Premiums for these two policies are paid to the respective insurance companies from an escrow account at the bank. Credit report fee: $85 Title search and deed recording fee: $420 Loan origination fee: $900 . Titie insurance policy-Lender: $375 . Mortgage payment (principal and interest): $2,410 Appraisal and survey fees: $600 Attorney fees: $1,050 Home, termite, and radon Inspections: $575 Title insurance policy-Homeowner: $450 Messenger and document fees: $315 Property taxes on the condominium: $15,750 per year . The property taxes and homeowner's policy should be pro-rated. Cost Incurred Amount Paid At Closing Monthly $ $ $ $ $ $ $ Using the given information, what is the loan-to-value (LTV) ratio required by the Fifth State Bank? 87.00% 13.00% 114.94% of his mortgage, and his monthly costs are of David's total closing costs are monthly income