You are looking to purchase your first home and have picked one out. The house costs $287,000.00, and you saved up 8% in cash and you will need to get a loan/mortgage for the remainder of the purchase price. You also need to get private mortgage insurance, which will cover 25% of your loan amount in the event of default. The PMI involves a 3.5% of loan premium due at closing, which will be added to the loan balance. The loan is an Adjustable-Rate mortgage with a fixed interest rate for the first 5 years, and then the rate then changes one time every 2 years thereafter on the anniversary of the loan, with a maximum interest rate increase of up to 2% per change. The underlying index for the loan is Wall Street Journal Prime and the rate is the index plus %. The loan 30 years amortization and a 30-year term. Under these circumstances, answer the following questions.

Assume that the loan rate is 3.7'% for the first 5 years. What is the mortgage payment due for first month? Use Excel to make it easier and the show your work.

What will be the loans principal balance after the first 5 years?

If you were to default on your loan after the ninth month payment, what is the net loss of the bank if the house sold for $265,000 a month later and had closing costs of 9% of the sales price? Use Excel to make it easier and the show your work.