Question 10 (2 points)
A bank offers three mortgages shown. Which mortgage(s) will have fixed payments for at least the first 6 years?
Fixed rate mortgage at 5% for 15 years
Adjustable rate mortgage at 3% for 15 years with terms 6/2 and a cap of 2/4
Balloon mortgage at 4% with terms 15/4
(2 points)
a
Fixed rate only
b
Fixed rate and balloon only
c
Fixed rate and adjustable rate only
d
Fixed rate, adjustable rate, and balloon
Question 11 (2 points)
A $525,000 adjustable rate mortgage is expected to have the following payments:
Year InterestRate MonthlyPayment
1-5 4% $2,506.43
6-15 6% $3,059.46
16-25 8% $3,464.78
26-30 10% $3,630.65
What is the total cost of the mortgage rounded to the nearest dollar? (2 points)
a
$525,000
b
$95,928
c
$1,151,134
d
$561,750
Question 12 (2 points)
A bank charges 3.1 discount points on a loan of $417,800. What is the cost of the points? (2 points)
a
$8,356.00
b
$129,518.00
c
$12,951.80
d
$4,178.00
Question 13 (2 points)
Josephine has purchased her first home. Her choice of loans is shown.
Loan A Loan B
$100,000
30 year-fixed
1 discount point
M = $521.65 $100,000
30 year-fixed
0 discount point
M = $536.82
What is the difference between the total cost of principal, interest, and points for each loan? (2 points)
a
$15.17
b
$1,000
c
$4,461.20
d
$5,461.20
Question 14 (2 points)
The bank offers Mark a fixed rate loan with no points and a fixed rate loan with points. The difference in monthly payments between the loan with points and the loan without points is $19.18. The cost of the points is $1,200. What number is closest to the break-even point rounded to the nearest month? (2 points)
a
5 months
b
12 months
c
42 months
d
63 months
Question 15 (2 points)
The seller of a property has paid $4,500 in property taxes for the year in advance. The closing date of the sale is December 10 and the buyer owns the home on the closing day. How much does the buyer owe the seller in prorated property taxes? Assume the year has 365 days. (2 points)
a
$12.33
b
$258.90
c
$271.23
d
$4,500.00
Question 16 (2 points)
A house sold for $400,000. The mortgage on the house is $300,000. The documentary stamp tax on the deed is $0.70 per $100 or portion thereof. How much is the documentary stamp tax on the deed? (2 points)
a
$210
b
$280
c
$2,100
d
$2,800
Question 17 (2 points)
A bank charges 1.75 of a point for the origination fee on a mortgage of $400,000. What is the origination fee? (2 points)
a
$7,000
b
$700
c
$1,750
d
$175
Question 18 (2 points)
Baldwin has purchased a home for $174,000. He made a 10% down payment and financed the remaining amount. The intangible tax is 0.3%. Which of the following is the total amount of the intangible tax? (2 points)
a
$52,200.00
b
$522.00
c
$469.80
d
$46,980.00
Question 19 (2 points)
A mortgage is in the amount of $400,000. The origination fee is 0.2%, the intangible tax is 0.4%, and there are 1.9 discount points. Which of the following is the total cost of the origination fee, intangible tax, and discount points? (2 points)
a
$9,200
b
$10,000
c
$7,600
d
$2,400
Question 20 (2 points)
Drake is purchasing a home for $249,000. He makes a 30% down payment and obtains a 25-year fixed rate mortgage loan at 5% annual interest. His monthly payments are $1,018.94. He pays an intangible tax of 0.4%. Which of the following is the total cost of principal, interest, down payment, and intangible tax? (2 points)
a
$381,378.00
b
$381,079.20
c
$305,682.00
d
$306,379.20
Answers
Answer:
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The fixed rate mortgage at 5% for 15 years will have fixed payments for at least the first 6 years. The adjustable rate mortgage at 3% for 15 years with terms 6/2 and a cap of 2/4 will have fixed payments for the first 6 years. The balloon mortgage at 4% with terms 15/4 will not have fixed payments for the first 6 years. Therefore, the answer is:
c
Fixed rate and adjustable rate only
Question 11
The total cost of the mortgage can be found by calculating the sum of all monthly payments for 30 years. Using the formula for the present value of an annuity, the total cost of the mortgage is:
$2,506.43 × ((1 - (1 + 0.04/12)^-60) / (0.04/12)) + $3,059.46 × ((1 - (1 + 0.06/12)^-120) / (0.06/12)) + $3,464.78 × ((1 - (1 + 0.08/12)^-120) / (0.08/12)) + $3,630.65 × ((1 - (1 + 0.1/12)^-60) / (0.1/12)) = $1,151,134
Therefore, the answer is:
c
$1,151,134
Question 12
Discount points are equal to the loan amount multiplied by the discount rate. In this case, the discount points are:
$417,800 × 0.031 = $12,951.80
Therefore, the answer is:
c
$12,951.80
Question 13
The total cost of principal and interest for Loan A can be found by calculating the sum of all monthly payments for 30 years, which is:
$521.65 × 360 = $187,194
The total cost of principal and interest for Loan B can be found in the same way, which is:
$536.82 × 360 = $193,855
The total cost of points for Loan A is:
$100,000 × 0.01 = $1,000
Therefore, the difference between the total cost of principal, interest, and points for each loan is:
$193,855 - $187,194 - $1,000 = $5,661
Therefore, the answer is:
d
$5,661.20
Question 14
The break-even point is the number of months it takes for the cost of the points to be equal to the monthly savings. The monthly savings is the difference in monthly payments between the loan with points and the loan without points, which is $19.18. The break-even point can be found by dividing the cost of the points by the monthly savings and rounding to the nearest month:
$1,200 / $19.18 ≈ 63
Therefore, the answer is:
d
63 months
Question 15
The seller has paid property taxes for the entire year, but the buyer only owes taxes for the portion of the year that they own the property. The portion of the year that the buyer owns the property is:
(365 - 344) / 365 = 21 / 365
Therefore, the buyer owes the seller:
$4,500 × (21 / 365) = $258.90
Therefore, the answer is:
b
$258.90
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