Jacob had finally found the house he was looking for. He knew that one of the keys of real estate investing was to purchase properties for at least 30% below market value. He had done his research, and with an asking price of $124,500, this 2-bedroom starter home was a bargain and well within his price range. The house, though, needed a number of repairs. He was confident that the work could be completed for $12,000. Jacob decided that the total cost of the house would be $140,000 or less, including any settlement charges. Complete parts 1 through 5. B Click the icon to view the monthly payment per $1,000 of amount financed table. 1. By putting 12% down on the house, Jacob can get a 30-year fixed-rate mortgage for 4.25%. Based on a purchase price of $140,000, compute the down payment, and the monthly payment for the loan. The down payment is $(Type an integer or a decimal.) What is the monthly payment for the loan? $(Round to the nearest cent as needed.) 2. Although Jacob hopes to have the house sold in a few months, he knows there is a possibility that it will not sell quickly. In that case, he would likely end up keeping it as a rental property. Using the information from part 1, find the total amount of interest Jacob will pay on the mortgage if he keeps it for the full 30 years. $(Type an integer or a decimal.) 3. Jacob finds a lender that will offer him 100% financing using an adjustable-rate mortgage based on a 30-year amortization, with a 5-year interest lock at 4.75%. The loan, however, would include a prepayment penalty, which is applied as 85% of the balance of the first mortgage, times the interest rate, divided by 2. Compute the new mortgage payment, along with the maximum prepayment penalty. The monthly payment for this mortgage is $. (Round to the nearest cent as needed.) The maximum prepayment penalty is $(Round to the nearest cent as needed.) Is it a good idea for Jacob to take this loan? Why or why not? O A. It is not a good idea. Jacob would have to make a down payment as well as the prepayment penalty. The interest rate could go up significantly if he does not sell the house in 5 years. OB. It is a good idea because Jacob would not have to make a down payment and the prepayment penalty is not a disincentive to sell the house quickly. Since the interest rate is fixed, Jacob does not need to worry about selling the house quickly. OC. It is not a good idea. Jacob would not have to make a down payment but the prepayment penalty is a disincentive to sell the house quickly. The interest rate could go up significantly if he does not sell the house in 5 years. OD. It is a good idea because Jacob would not have to make a down payment. The interest rate could go down significantly if he does not sell the house in 5 years. 4. Jacob decides the 30-year fixed rate mortgage is best for him. Construct an amortization table for the first three payments of the mortgage. Use the monthly principal and interest payment from part 1 Monthly payment Loan balance Interest Principal End-of-month principal Payment number 1 Monthly interest rate 0.0035417 2 0.0035417 OOD OOD 3 0.0035417 (Type integers or decimals rounded to two decimal places as needed.) 5. Jacob has a gross monthly income of $3740 and total fixed monthly expenses of $1200 including the home ownership-related expenses. His annual real estate taxes will be $2688 and his annual homeowner's insurance will be $900. Using the monthly principal and interest rate from part 1, calculate the total PITI payment, loan-to-value ratio, housing ratio, and debt-to-income ratio if the home appraises for $157,000. Are your answers within an acceptable range? What are the implications for Jacob? The total PITI payment is $(Round to the nearest cent as needed.) How might your answer for the housing ratio affect Jacob's ability to purchase this home? O A. The loan-to-value ratio is more than 80%, so he may be required to purchase private monthly insurance. OB. The loan-to-value ratio is more than 80%, so it is not likely he will be required to purchase private monthly insurance. OC. The loan-to-value ratio is less than 80%, so it is not likely he will be required to purchase private monthly insurance. OD. The loan-to-value ratio is less than 80%, so he may be required to purchase private monthly insurance. The housing ratio is %. (Round to the nearest percent as needed.) How might your answer for the housing ratio affect Jacob's ability to purchase this home? O A. The housing ratio should not exceed 28%, so his ratio is within the limit. OB. The housing ratio should exceed 28%, so his ratio is below the limit. The lender may raise the interest rate of Jacob's loan. OC. The housing ratio should exceed 28%, so his ratio exceeds the limit. OD. The housing ratio should not exceed 28%, so his ratio exceeds the limit. The lender may raise the interest rate of Jacob's loan. The debt-to-income ratio is %. (Round to the nearest percent as needed.) How might your answer for the debt-to-income ratio affect Jacob's ability to purchase this home? O A. The debt-to-income ratio should be no more than 36% and his ratio is lower than 36%. The lender will accept the loan as-is. OB. The debt-to-income ratio should be no more than 36% and his ratio is lower than 36%. The lender may require Jacob to pay down other debt, raise the interest rate of his loan, or deny the loan. O C. The debt-to-income ratio should be no more than 36% and his ratio is higher than 36%. The lender will accept the loan as-is. OD. The debt-to-income ratio should be no more than 36% and his ratio is higher than 36%. The lender may require Jacob to pay down other debt, raise the interest rate of his loan, or deny the loan. More Info . 1 Annual interest rate Years financed 3.00% 3.25% 3.50% 3.75% 4.00% 4.25% 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25% 6.50% 6.75% 10 9.66 9.77 9.89 10.01 10.12 10.24 10.36 10.48 10.61 10.73 10.85 10.98 11.10 11.23 11.35 11.48 12 8.28 8.40 8.51 8.63 8.76 8.88 9.00 9.12 9.25 9.37 9.50 9.63 9.76 9.89 10.02 10.15 15 6.91 7.03 7.15 7.27 7.40 7.52 7.65 7.78 7.97 8.04 8.17 8.30 8.44 8.57 8.71 8.85 17 6.26 6.39 6.51 6.64 6.76 6.89 7.02 7.15 7.29 7.42 7.56 7.69 7.83 7.97 8.11 8.25 20 5.55 5.67 5.80 5.93 6.06 6.19 6.33 6.46 6.60 6.74 6.88 7.02 7.16 7.31 7.46 7.60 22 5.18 5.31 5.44 5.57 5.70 5.84 5.97 6.11 6.25 6.39 6.54 6.68 6.83 6.98 7.13 7.28 25 4.74 4.87 5.01 5.14 5.28 5.42 5.56 5.70 5.85 5.99 6.14 6.29 6.60 6.75 6.91 30 4.22 4.35 4.49 4.63 4.77 4.92 5.07 5.22 5.37 5.52 5.68 5.84 6.00 6.16 6.32 6.49 35 3.85 3.99 4.13 4.28 4.43 4.58 4.73 4.89 5.05 5.21 5.37 5.54 5.70 5.87 6.04 6.21 6.44 Print Done