John and Ellen are buying a house appraised and selling for $160,000, 4%, 30-year home mortgage. They plan on applying for an FHA loan due to the low down payment requirements. They anticipate paying 3.5% down payment. They do not have the money themselves. Their combined gross monthly income is $4800. The taxes are $3600 and the homeowners insurance is $1200, annually. Do not include other closing costs. The bank will do this loan if they meet the income ratio requirements with regard to housing expenses. PMI (Private Mortgage Insurance) and MIP (Mortgage Insurance Premium) are the same references.

2021 MIP Rates for FHA Loans Over 15 Years (applies to 30-year loans)

1. How much will the basic home loan be without any PMI?
2. From where are John and Ellen allowed to get the down payment?
3. What is the total cost, rounded to the nearest dollar, for the home and loan expenses? Home Price plus loan interest only. (Without PMI costs)
4. Do John and Ellen qualify using the housing expense ratio for FHA? Use the formula and values given in the textbook, chapter 8.
5. What is the up-front PMI (rounded to the nearest dollar)?
6. What is the annual PMI fee (rounded to the nearest dollar)?
7. If the PMI is allowed to come off the loan after the 11th year, what is the total cost for PMI to the borrower (rounded to the nearest dollar)?
8. What is the total cost of this property (rounded to the nearest dollar)? (Down payment, Principal, interest, and PMI)?
9. Compare the total cost to a $160,000 house under a 'conventional' loan, 20% down circumstances at the same interest rate for a 30-year loan. Show the total cost of the home under each loan term and identify the total cost difference in dollars (Down payment, Principal, interest, and PMI).