Ask Question
10 June, 01:35

You are ready to buy a house, and you have $40,000 for a down payment and closing costs. Closing costs are estimated to be 6% of the loan value. You have an annual salary of $60,000, and the bank is willing to allow your monthly mortgage payment to be equal to 28% of your monthly income. The interest rate on the loan is 4% per year with monthly compounding for a 15-year fixed rate loan. What is the down payment for the house? (Choose the nearest value) a. $11,356.14. b. $18,643.86. c. $28,643.86. d. $21,356.14.

+4
Answers (1)
  1. 10 June, 05:04
    0
    c. $28,643.86

    Explanation:

    For computing the down payment we need to do following calculations which are shown below;

    Since annual salary is $60,000 so monthly salary is

    = $60,000 : 12 months

    = $5,000

    And, the monthly mortgage payment equal to 28% of monthly income i. e

    = $5,000 * 28%

    = $1,400

    Now the present value is

    = $1,400 * {1 - (1 : 1 + 0.003333) ^180} : 0.003333

    = $1,400 * 135.1822927

    = $189,255.2098

    The 4% is annual rate so monthly rate is 0.003333

    And, monthly year is

    = 15 years * 12 months

    = 180 months

    And, closing cost is 6% of the loan value i. e

    = $189,255.2098 * 6%

    = $113,55.31259

    Now the down payment is

    = $40,000 - $113,55.31259

    = $28644.69 i. e $28,643.86 approx

    We simply do the above calculations so that the down payment could come
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “You are ready to buy a house, and you have $40,000 for a down payment and closing costs. Closing costs are estimated to be 6% of the loan ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers