Assume you are looking to buy a new home for $325,000 and you were shopping for a mortgage. You are prepared to pay 17% down. Mortgage Company A offersyou a 30 year fixed rate mortgage at 5%. Mortgage company B offers you a 20 year fixed rate mortgage at 4%. Use a mortgage payment calculator to calculate the approximate mortgage payments. Answer the following questions:

What is the dollar amount of the down payment? What is the dollar amount of the mortgage (amount borrowed)? What is the mortgage payment (principal and interest only) on the 30 year mortgage at a fixed rate of 5%? In most cases a lender would require a mortgage insurance (about 0.5% - 1.5% of loan value) if the down payment is less than 20% of the home value. Since you are making only 17% down payment, what would be your mortage insurance (PMI portion only) for the amount you are borrowing per year if the PMI is 0.5% of loan value ? What is the PMI portion of your monthly mortage payment per month? What is the monthly mortage payment (principal and interest and PMI) on the 30 year mortgage? To determine if Mortgage B is /is not affordable : What is the mortgage payment (principal and interest only) on the 20 year mortgage? What is the monthly mortage payment (principal and interest and PMI) on the 20 year mortgage where PMI is 0.5% of the loan amount If you choose Mortgage A and assuming you keep the loan to maturity, how much interest will you pay throughout the life of the loan? If you choose Mortgage B and assuming you keep the loan to maturity, how much interest will you pay throughout the life of the loan? Using $5,000 as gross income and using the 33/38 PITI rule for determining qualification, do you qualify for: Mortgage A? Mortgage B?