The client's goal is to buy a home and they have started house hunting and think they can find an acceptable property in the $120,000 price range. The lenders they are dealing with typically require a 10% down payment. Their mortgage choices are: Mortgage A Mortgage B 30-year fixed-rate mortgage 30-year adjustable-rate mortgage (ARM) 4.0% interest with 2 discount points 3.8% interest with 3 discount points other closing costs of $3,300 (includes a 1% loan other closing costs of $3,300 (includes a 1% loan origination fee) origination fee) monthly payments 1.0% annual interest rate cap (meaning the interest rate can increase 1% per year until the cap) 8.0% overall interest rate cap (meaning the interest rate can increase to a total of 11.8% over the life of the loan). monthly payments Consider the following additional costs and/or changes in expenditures associated with the purchase and maintenance of this house: Property taxes of 2.0% of the house value ($2,400/year) Homeowners insurance of $895/year Private mortgage insurance of $325/year (required if he makes a down payment of less than 20%) Maintenance of 2.0% of the house value ($2,400/year) Utility expenditures (gas, electricity, and water) of $100/month increase The client expects to live in this house at least 5 years. Q3: In EXCEL calculate the following: Client makes a 10% down payment on a $120,000 house, find the front-end costs and the monthly payments for principal and interest (P&I) on each of the above two mortgages (remember that the amount of the mortgage is the cost of the house minus the down payment). When figuring out the front-end costs, include all the costs regardless of the source of the money paying for them. Also note that the 1% loan origination fee is already included in the stated closing costs, so don't add it in again. The client's goal is to buy a home and they have started house hunting and think they can find an acceptable property in the $120,000 price range. The lenders they are dealing with typically require a 10% down payment. Their mortgage choices are: Mortgage A Mortgage B 30-year fixed-rate mortgage 30-year adjustable-rate mortgage (ARM) 4.0% interest with 2 discount points 3.8% interest with 3 discount points other closing costs of $3,300 (includes a 1% loan other closing costs of $3,300 (includes a 1% loan origination fee) origination fee) monthly payments 1.0% annual interest rate cap (meaning the interest rate can increase 1% per year until the cap) 8.0% overall interest rate cap (meaning the interest rate can increase to a total of 11.8% over the life of the loan). monthly payments Consider the following additional costs and/or changes in expenditures associated with the purchase and maintenance of this house: Property taxes of 2.0% of the house value ($2,400/year) Homeowners insurance of $895/year Private mortgage insurance of $325/year (required if he makes a down payment of less than 20%) Maintenance of 2.0% of the house value ($2,400/year) Utility expenditures (gas, electricity, and water) of $100/month increase The client expects to live in this house at least 5 years. Q3: In EXCEL calculate the following: Client makes a 10% down payment on a $120,000 house, find the front-end costs and the monthly payments for principal and interest (P&I) on each of the above two mortgages (remember that the amount of the mortgage is the cost of the house minus the down payment). When figuring out the front-end costs, include all the costs regardless of the source of the money paying for them. Also note that the 1% loan origination fee is already included in the stated closing costs, so don't add it in again
