HOME LOAN - Title Page, (Optional) - Table of Contents, (Optional) - Analysis, (
ID: 2750787 • Letter: H
Question
HOME LOAN
- Title Page, (Optional)
- Table of Contents, (Optional)
- Analysis, (Required)
- Assumption, (Required)
- Finding/ Answers (Required)
(2)
- You should use Microft Word and/or Excel for (Required) report
- You can use tables, graphs, calculations, and charts on report.
(3)
- Make valid assumptions. (example; college debt, paid vacation, dependents)
- Round up your numbers to whole Dollars
- Follow all the arrows on the paper
- Make sure to cross check your work before submitting.
(4)
- Resources for Home Values:
zillow.com
homesale.com
trulia.com
Loan Consultant A young couple recently married is re to buy a home. The wife is an engineer making sgo.ooo ady annually and the husband is a high school coach making annually. have been saving even before getting married and put away enough money for They First, how much have a down expenses, fixer upper or home they can afford applicable assumptions current move-in enough money to furnish the home, home owner association fees, etc) Select at least 2 homes in different cities that the couple can afford. Provide information on the homes; property type, price, location, size, etc. p They have the following options to take a home loan; 1. 30-year fixed loan with 20% down Interest rate: 5.25% 2. 5-years Adjustable Rate Mortgage (ARM) loan with zero down Interest rate: 3,75% (first 5 years), then 7% for the remaining 25 years 3, 5-year Interest only loan with 10% down (After paying only the interest in first 5 years, he has to pay the principal and the interest in the remaining 25 years.) Interest rate: 4.75% You are asked to make valid assumptions, show all calculations and have the final results as a table comparing the loan options for each home. For each loan option complete the following Total cost of the loan Total interest paid on the loan The APR (including the cost of loan) The monthly payments Finally, provide a conclusion based on the assumptions made on which combination home and loan is better suited for the couple starting out. (why?) Extra Credit: growth in value year after year. What Assuming the local real estate market s a 5% ten years? Should the couple upgrade would the value of the home (including the loan) be in the home or sell it to purchase a bigger home in another location? (Show your calculationsExplanation / Answer
Answer: Requirement-1 As their total annual income is $90000 + $70000 = $160,000 They can get loan amount to three times their combined annual income. So, loan may be offered by the bank = $480,000 Now as per their income we have selected two properties: 1 Property in California, USA Details: Living area = 104 square metres Land area = 108 square metres Number of bedrooms = 2 Construction year = 2007 Location = California, Riverside County, Palm Springs. Price = $300,000 2 Property in Missouri, USA Details: Living area = 326 square metres Land area = 340 square metres Number of bedrooms = 4 Construction year = 1995 Location = Missouri, Jackson County, Kansas City Price = $250,000 Now we have to make calculation for each home type: For property-1 1 Loan type-1 term of loan = 30 years Interest rate (fixed)= 5.25% Down payment = 20% So Value of the property = $300,000 Down payment = $60,000 Loan = $240,000 Therefore emi on the laon = $1,325.29 per month And APR on laon = 5.25% For property-2 1 Loan type-1 term of loan = 30 years Interest rate (fixed)= 5.25% Down payment = 20% So Value of the property = $250,000 Down payment = $50,000 Loan = $200,000 Therefore emi on the laon = $1,104.41 per month And APR on laon = 5.25% For property-1 1 Loan type-2 term of loan = 5 years Interest rate (fixed)= 3.75% Term of loan 25 years Interest rate (fixed)= 7% So Value of the property = $300,000 Down payment = $0 Loan = $300,000 Therefore emi on the laon = $3,370.84 per month And APR on laon = -1.61% For property-2 1 Loan type-2 term of loan = 5 years Interest rate (fixed)= 3.75% Term of loan 25 years Interest rate (fixed)= 7% So Value of the property = $250,000 Down payment = $0 Loan = $250,000 Therefore emi on the laon = $2,809.03 per month And APR on laon = -1.61% For property-1 1 Loan type-3 term of loan = 30 years Interest rate (fixed)= 4.75% Down payment = 10% So Value of the property = $300,000 Down payment = $30,000 Loan = $270,000 For first 5 years Interest paid = $27,000 Therefore emi on the laon = $1,539.32 per month And APR on laon = 5.54% For property-2 1 Loan type-3 term of loan = 30 years Interest rate (fixed)= 4.75% Down payment = 10% So Value of the property = $250,000 Down payment = $25,000 Loan = $225,000 For first 5 years Interest paid = $22,500 Therefore emi on the laon = $1,282.76 per month And APR on laon = 5.54% In my opinion Option -2 is better.
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