I HAVE ALREADY ANSWERED THE FIRST PART, I NEED HELP SOLVING PARTS 2 and 3! THANK YOU FOR YOUR HELP!!!

PART 1

Tom and Nancy want to buy a house in a particular neighborhood. they have two children ages 1 and 4. The average price home in this neighborhood runs about $350,000.Together their family income is $100,000.They have saved $75,000. The home they want to purchase costs $300,000. Taxes on the home run $3.00 per $100 of assessed value of the home. For new homes the assessed value is equal to 75% of the purchase price. Insurance runs half of one percent of the purchase price of the home. An Adjustable Rate Mortgage (ARM) requires a 10% down payment. Conventional loans require 20% down payment.

Interest for an ARM currently is 4.5 %. The conventional loans are 5.25% today.

Compute the per month cost includinginterest, taxes and insurance (use above formula to get the taxes and insurance cost) for a ARM.

Show your work: (25 points)

Adjustable Rate Mortgage = 10% down payment

Conventional loans = 20% down payment

ARM interest = 4.5%

Conventional loans = 5.25%

Purchase cost = $300000

Savings = $75000

Family Income = $100000

Tax = 3% of assessed value

Assessed value = 75% of purchase price = 0.75*300000 =

Insurance = 0.5% of purchase price

1.What will their down payment be?

For ARM = $30000

For Conventional loans = $60000

2.What will the cost of insurance be per month?

Insurance = 0.5% of purchase price = $1500

$1500 / 12 = $125

3.What will their taxes be per month?

$225000Tax = 3%= 6750per month payment = 6750/12 = 562.5

4.What will their principal and interest be per month?

ForARM = $270000

For Conventional loans = $240000

5.What is their total monthly payment going to be including everything?

total monthly payment = 2798.24 + Tax per month + Insurance per month = 2798.24 + 562.5 + 125 = 3485.74

Total monthly payment = 2575 + 562.5 + 125 = 3262.5

PART 2

If they are currently renting a three-bedroom apartment for $1,750 per month. Just based on cost of renting vs. cost of buying with the above ARM, which would be cheaper and by how much per month? (20 poinra)

3. If the couple were to get a conventional loan, what would their cost be using the price of home and figures for figuring taxes and insurance. You will need to use a mortgage calculator. You can find them by asking Google or in one of the files in this module's content area. Show your figures. (20 points)

a. Monthly principal and interest____________________

b. Monthly taxes________________________________

c. Monthly insurance_____________________________

d. Total cost of house payment using aconventional loan.

PART 3

Make a brief description of what a home equity loan is, how it works, what the advantages of a home equity loan over a personal loan, and how it can be used as a savings account.(35 points)