You are given with the following information of two proposals of financing programs for

your home loan. Suppose the new house costs you $540,000 (sales taxes and others are

included). One program is asking you to deposit a 20% down payment on the $540,000 and it

provides you with 3.24% interest rate for 15-year monthly payments of the remaining

balance, the other program is a 100% financing program which gives you a 2.2% for the first

5 year plus the PMI (property mortgage insurance) as $300 per month with a balloon

payment as $530,000.(That is, a lump-sum payment at the end of 5th year). The mortgage rate

increases to 5.85% afterward for a 30-year mortgage if the balloon payment is not paid and

refinancing is applied (That is, the extended program is for 30 years not for the 25 years

leftover). Let there be no prepayment penalty. That is, you may pay off the loan should you

have some extra cash later on. The brokerage fees and commissions are already taken into

account in all the numbers given. Answer the following questions.

a) What is the monthly payment for each program in the first 5 years? Which one is more

favorable to you if your monthly income is $7,000 before tax? (Notice that most lenders will

require the borrower to have ratio between mortgage payment and monthly income no

greater than 33%).