Question

Mortgage Exam Practice Help .

Answer 1

house costs him \($185,500\)

Answer 2

since he is making \(15\%\) down payment,
he will be borrowing the remaining \(85\%\) from bank

Answer 3

so simply take \(85\%\) of the house cost

Answer 4

$157,675?

Answer 5

yes, thats the mortgage amount he will be borrowing !

Answer 6

how would I find out based on the information I showed if he can afford that loan ?

Answer 7

or sorry not the loan but the mortgage

Answer 8

calculate his monthly payment

Answer 9

he is going to take $157,675 loan,
and he pays it back in 25 years at 4.25 % interest rate

Answer 10

look at the chart,
whats the monthly payment for $1000 for him ?

Answer 11

btw, the shown chart is giving monthly payment for $1000 for different options

Answer 12

5.417 per thousand ?

Answer 13

Correct !
so, per month - he needs to pay 5.417 per every thousand

Answer 14

so, total monthly payment = \(\large 157,675 \times \frac{5.417}{1000} = ?\)

Answer 15

So to find the payment I would multiply 5.417 by 157.675 ?

Answer 16

yes u wud multiply 5.417
and divide 1000 also

Answer 17

^^

Answer 18

wat do u get ?

Answer 19

$854.13

Answer 20

correct thats his monthly payment

Answer 21

how much he will be paying per year ?

Answer 22

$10,249.51 ?

Answer 23

yes,
can he afford to pay that much amount every year ?

Answer 24

whats his income ?

Answer 25

$84,482 annually

Answer 26

can he afford to pay the payments ?

Answer 27

No , I wouldn't think so .

Answer 28

why not ?

Answer 29

he is earning $84,482 yearly
cant he make a $10,249.51 payment ?

Answer 30

ohhhh right . okay . yeah :P

Answer 31

loan is a DEBT,
he needs to pay it....

Answer 32

he borrowed money to purchase home

Answer 33

the builder took the "loan money" from bank, and gave the house to Victor.

Answer 34

Victor is left wid a "house" and a "loan to pay"

Answer 35

thats the story, okay ?

Answer 36

Victor doesnt get any money from bank,
Money goes to whoever is selling the house.

After the sale,
Victor gets a "house" + "mortgage bill to pay"

Answer 37

Oh ok that makes sense . So then is the total amount payed for the house $185,500?

Answer 38

no ways !

Answer 39

remember he is paying 4.25% on the balance amount...
so the total cost of house will be way more than $185,000

Answer 40

total cost of home = (annual payment) * (number of years)

Answer 41

= $10,249.51 * 25

Answer 42

right ?

Answer 43

Thats what I thought .

Answer 44

ofcourse you need to add the initial 15% down payment also

Answer 45

so total cost of house = (15% of 185,500) + $10,249.51 * 25

Answer 46

does that make sense ha

Answer 47

$284,062.75 ?

Answer 48

correct !! thats the total money he wud be paying in 25 years for the house

Answer 49

Okay and lastly . Concerning the amount he took out in a loan ..does $167,529.69 seem right for interest ? Interest= P x R x T

Answer 50

he took 85% amount as loan right ?

Answer 51

so he pays interest for the same over 25 years

Answer 52

interest paid = ($10,249.51 * 25) - (85 % of $185,500)

Answer 53

so then $98,550

Answer 54

http://www.wolframalpha.com/input/?i=++%2810%2C249.51++*+25%29+-++%2885%25+of+185%2C500%29

Answer 55

wolfram says $98,562.75