math questions

MAT 115 Project #2 Home Ownership

Name _____________________________

In this “Home Ownership” Project, each student will be required to find a home, condo, etc…. for sale that you would like to

purchase in Mecklenburg County. You may visit realtor internet sites, magazines, newspapers, etc… . to find your dream

home (print or cut out the home, specifications, location, and price). For the home of your selection, you are to compute the

following down payment, points, insurance, taxes, and mortgage payment information for two loan offers from XYZ Bank.

Using the information from the dream home that you are purchasing, the bank loan details, and calculate the following

information given below.

This project is due in class on Sunday April 5 at 11:59 pm via Blackboard. You must submit your project either in Microsoft

Word, Adobe PDF, or Power point through the Project #2 assignment submission item in Blackboard under the current week.

No late projects will be accepted​. ​Projects must be typed.​ Projects will be scored on accuracy, completeness, and neatness.

There are several things to consider when buying a house. There is the cost, the cash needed at closing, the monthly

mortgage payment, the tax needed monthly, insurance amounts needed monthly, the Private Mortgage Insurance

(PMI) often required, and the amount of loan for which you can qualify.

a.) Required Down Payment for a home can be different percentages. Some home loans don’t require a

Down Payment to finance the home while other require as little as 3% of the selling price of the home.

The Down Payment is also used to reduce the principal amount of the home when calculating the

mortgage payment. Use the required Down Payment given in the bank loan.

b.) Closing costs are fees for surveying and a loan origination fee paid to the bank. These are fees paid to

the bank, attorneys, etc.. to originate, file documents, etc.. for your loan. Sometimes these fees are

given in a point value. For example two points at closing is equivalent to 2% of the home loan. Closing

Costs are not part of your mortgage payment. Use the point value given in the bank loan.

c.) The Private Mortgage Insurance PMI is approximately $400/year. You are required to carry this

insurance if you do not pay 20% down whether the bank loan requires a down payment or not. PMI is

not included in the calculations to find mortgage payment, but added to your monthly mortgage

payment until the home loan is twenty percent less than the appraisal value of home. Use $400/year

as your PMI if you are not paying the 20% down payment. Use the required Down Payment given in the

bank loan to determine if you need PMI.

d.) The combined City/County yearly property tax rate in Mecklenburg County is $1.2568/$100 of assessed

value. For the county, if the house is not within Charlotte city limits, the rate is $0.8368/$100 of

assessed value. Taxes are not included in the calculations to find mortgage payment but added to your

monthly mortgage payment. Assume the assessed value is the selling price of the home.

e.) You will need to purchase Homeowners Insurance for incidentals that happen to you home such as

fire, burglary, storm damage, etc... Homeowners Insurance at about 0.24% of the selling price of the

home calculated every six months. Homeowners Insurance is not included in the calculations to find

mortgage payment, but added to your monthly mortgage payment.

f.) The mortgage payment of your home is the calculation of the principal amount (after deducting all down payments), fixed interest rate, number of payments made, and time (in years) the home is financed given by the formula below.

(​You must show your work for all parts a-f)

Bank Loan Offer 1: The bank requires 5% down payment for 20-year fixed at 3%. The closing costs are $2000 plus

one point.

a.) Down Payment Calculation:

b.) Closing Costs Calculation:

c.) Monthly Private Mortgage Insurance Calculation:

d.) Yearly and Monthly Property Tax Calculation:

e.) Yearly and Monthly Homeowners Insurance Calculation:

f.) i. ) Monthly Mortgage Payment Calculation Principal and Interest: ii.) Monthly Mortgage Payment Calculation Principal and Interest, PMI, Taxes, and Homeowners Insurance: iii.) Calculate the Interest paid over the entire loan:

Bank Loan Offer 2: The bank requires 20% down payment for 30-year fixed at 3.25%. The closing costs are $1500

plus four points.

a.) Down Payment Calculation:

b.) Closing Costs Calculation:

c.) Monthly Private Mortgage Insurance Calculation:

d.) Yearly and Monthly Property Tax Calculation:

e.) Yearly and Monthly Homeowners Insurance Calculation:

f.) i. ) Monthly Mortgage Payment Calculation Principal and Interest: ii.) Monthly Mortgage Payment Calculation Principal and Interest, PMI, Taxes, and Homeowners Insurance: iii.) Calculate the Interest paid over the entire loan:

Complete a summary of the finding to your calculations in paragraph format address the following questions. In terms of paying less in interest, which loan offer is more economical? Which loan has the greater total loan costs (closing costs + amount paid for points + total cost of interest)? Which loan offer will you choose and why? What could be some steps that you start taking now to help prepare to purchase this home in the future?