Question
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
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 is a newly constructed dwelling that 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 homes assessed value.
The down payment for a 30-year conventional loan will be 20%. Down payment for a 5-year ARM will be 10%.
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If the couple were to get the Adjustable Rate Mortgage (ARM) loan at 3.5% annually, what would their monthly costs be? For the loan payment, use a mortgage calculator in the modules content area or search Google for mortgage calculators. Keep in mind that ARM loans are interest only. Remember to CITE YOUR SOURCE.
a. What will their down payment be? b. What will their mortgage payment be per month? c. What will total monthly costs be (including calculated taxes and insurance costs)?
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