How Should the Costs of Purchasing and Owning a Home Be Categorized? You can categorize the costs assocated with home ownership according to whether they are paid at closing, or monthly throughout the life of the mortgage loan, or even atter the home is paid off. Consider the following situation, and then complete the form that follows by entering the necessary data, dassifying the costs according to whether they represent up-front, monthly costs, or both. Einally, answer the associated questions that follow. Note: Round all dollar amounts to the nearest whole dollac, and if no payment is necessary, record a zero (0) in the 9pace, In case of deduction, enter the dollar amount without minus sign. When Should Michael Pay Housing Costs? On April 1 of next year, Michael is purchasing a $210,000 condominium and has accepted the Tenth National Bank's offer of a ten-year $170,100 Ioan with an interent rate of 64. . He has a gross annual income of 5100,000 and is concerned about how much his one-time up front costs and recurrand monthiv costs will be. He's recceived the following data and form, but he's not certain when he is to pay each cost-at dosirig, monthly, or both. your task is to help Michael by completing the form and dassitying the costs. Hint. Acmember that the purchase is expected to dose on the first of Aprit. This mieans the following: - 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 19% down payment but will also require 2 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 $680 per year, but is distributed 12 times per year, - Michael 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 pohcy-Lender: $375 - Mortoage payment (principat and interest): $1,888 - Appraisal and wurvey fees: 5600 - Attomer teen: $1,050 - Home, territe, and radon inspectionos $575 - TAde insurance policy-Homeowner: $450 - Messenger and document feesi $315 - Property taxes on the condominiurn: $15,750 per year - The proberty taxes and homeowner's polky bhould be pro-rated. - The property taxes and homeowner's policy should be pro-rated. Ch na. Accionment - Ahtaining Affordahle Housing Using the given information, what is the loan-to-value (LTV) ratio required by the Tenth National Bank? 81.00% 123.46% 19.00% Using the given information, what is the loan-to-value (LTV) ratio required by the Tenth National Bank? 81,00% 123.46% 19.00% Michaers total closing costs are of his mortgage, and his monthly costs are: of monthly income
