# Economics

posted by .

Engineering Economics
Essay 1:

You wish to purchase a home for \$150,000 and you can put down 10% of this price as down payment. You can get a 20 year fixed rate mortgage loan for 6.0% with no points. You can optionally decide to pay 2 points to bring the mortgage rate down to 5.25%. Your closing fees (not including points) are expected to be \$3,300. Your PMI (if applicable) is \$150/month for the first 4 years (after which you will have 20% equity), your property taxes are \$3,600/year and your casualty insurance is \$2,400/year. Your lender will collect the PMI, property tax and hazard insurance as monthly escrow payments along with your principal and interest payments.

a. What is the initial TOTAL CASH required to buy this house AT CLOSING with the given mortgage fees and down payment provided that you choose the 5.25% loan option?

b. What is the initial monthly payment (including PMI and monthly escrow) for the 6% loan option?

c. If you intend to live in the home for 5 years or less, which loan option should you take (i.e. pay points or not)? Assume MARR to be 10% on your other investments. You must show your work to mathematically justify your answer in order to get full credit. (NOTE: you can analyze this on an annual savings basis by multiplying the monthly savings by 12 and perform a reverse look-up of your N value in the 10 percent interest tables that were provided with the exam).

## Respond to this Question

 First Name School Subject Your Answer

## Similar Questions

1. ### Math and Society

You can afford monthly payments of \$1200. If current mortgage rates are 7.5% for a 30-year fixed rate loan, what loan principal can you afford?
2. ### business

Engineering Economics Essay Question: You wish to purchase a home for \$150,000 and you can put down 10% of this price as down payment. You can get a 20 year fixed rate mortgage loan for 6.0% with no points. You can optionally decide …
3. ### finance

You take out a 30- yr mortgage loan, purchase price is \$120,000 put \$20,000 down and finances the balance of \$100,000 at fixed annual loan rate of 12%, what will be your monthly payment?
4. ### math

The price of a home is \$215,000. The Bank requires 20% down payment and three points at the time of closing. The cost of the home is financed with a 30-year fixed-rate mortgage at 7%. Find down paymen
5. ### business developement

Calculate the monthly mortgage payment for only the principal and interest. Purchase price = 150,000; down payment = 20%; interest rate = 4.5%; 20 year term
6. ### Economics

Calculate the total dollar amount paid for a house purchased for \$200,000. The buyer paid \$50,000 as down payment and the remaining \$150,000 was obtained with a closed mortgage having a 25 year loan at 10% interest compounded semi-annually …
7. ### Finance

You are considering borrowing \$150,000 to purchase a new home. a. Calculate the monthly payment needed to amortize an 8 percent fixed-rate 30-year mortgage loan. b. Calculate the monthly amortization payment if the loan in (a) was …
8. ### Finance

If a home buyer purchases a home in 2006 for \$225,000 with a 10% down payment using a 30 year fixed mortgage rate at 6.5% and 3.5% closing costs added to the original mortgage, compute the following: a) the original amount of the mortgage …
9. ### Math

The Washingtons buy a \$260,000 home by putting 20% down and financing the balance with a 30-year fixed-rate 4.2% mortgage, compounded monthly. What is the amount of their monthly loan payment to amortize the loan?
10. ### math118

The price of a home is ​\$102,000. The bank requires a​ 20% down payment and three points at the time of closing. The cost of the home is financed with a​ 30-year fixed-rate mortgage at 9.5%  Find the required down payment.

More Similar Questions