4. In 2006 Juan and Maria purchased a home for $250,000. They were offered a 30-
ID: 2732212 • Letter: 4
Question
4. In 2006 Juan and Maria purchased a home for $250,000. They were offered a 30-year loan by a mortgage broker for no money down, interest only for the first three years at 3%, then automatically converting to an amortizing loan at 2 points above the prime rate (the prime rate is now 5%). What was their initial monthly payment, and what did it become after the reset? " PLEASE FOCUS ON THE WORDING THAT IS ASKING FOR THE BEFORE AND AFTER PAYMENT INFO AND ALSO ACTUALLY STATE WHAT THOSE PAYMENTS WILL BE USING THE FINANCIAL CALCULATOR KEYS SO I CAN DOUBLE CHECK. USE Financial Calculator keys to show your work so I can double check if your answer is correct.
Explanation / Answer
Total Loan Balance = (250,000*.02) + 250,000 = $255,000 after 3 years
Initial PMT interest 250,000*.03 = 7,500 per yr/12 months =$625
Reset
PV = 255000
N=12*27=324
FV=0
1/Y=5/12=0.417
PMT=1435.75
which means that to acquire a loan, you must makehigher monthly payments due to the increased risk of giving out loansduring the financial crisis in the 2009 housing market
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