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)

1.What will their down payment be? ____________________________________

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

3.What will their taxes be per month?____________________________________

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

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