Question
Bo and Sherry Wayside met in college. After dating a year, they decided to begin saving money for their future. So, they deposited $5,000 into
Bo and Sherry Wayside met in college. After dating a year, they decided to begin saving money for their future. So, they deposited $5,000 into a savings account earning 4.75% compounding annually. When they completed college, they planned to purchase their dream home. That money was earmarked as a sinking fund for their future home purchase. For 5 years, they did not touch the money. They graduated from college, secured jobs, got married, and they are ready to purchase their first home.
Question 1: Since the money sat in their account for 5 years, how much money did Bo and Sherry have saved for a down payment on their dream home?
Answer:
Bo and Sherry asked a mutual friend and realtor, Tammy Townhouse, to help them find a new home. First thing Tammy did was arrange for Bo and Sherry to sit down with a local lender to get prequalified for a mortgage loan. Bo and Sherry collected their personal, financial information and met with the lender. Their debt consisted of: monthly car payments: Bos was $211 and Sherrys was $155; and they each have a credit card with a minimum credit card payment of $10 a month. Bo earns $1,800 a month and Sherry earns $1,700 a month. The lender estimated their property taxes and insurance based upon the estimated price of their dream home. The estimates were: property taxes were $1,250 a year and home owners insurance were $520 a year.
Question 2: The lender used the back-end ratio of 41%, to qualify Bo and Sherry. What was the maximum monthly payment they qualify for?
Answer
The lender approved Bo and Sherry for a loan. They found their dream home. They loan was a 4.75%, 30-year mortgage for $135,000 with a monthly payment (PI) of $704.22. The lender required an escrow account. Their new home property taxes were $1,440 per year and their homeowners insurance was $725 per year.
Question 3: What was Bo and Sherrys total monthly payment (PITI).
Answer:
Question 4: Based on the terms of the loan, how much will Bo and Sherry pay for their home?
Answer:
Question 5: How much interest will Bo and Sherry pay for the total term of the mortgage loan?
Answer:
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