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Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

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BuyFindarrow_forward

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

You are a real estate broker for Aurora Realty. One of your clients. Erica Heston, has agreed to purchase one of the homes your office has listed for sale for a negotiated price of $235,000. The down payment is 20 % . and the balance will be financed with a 15-year fixed-rate mortgage at 8.75 % and 3 1 2 discount points. The annual property tax is $5,475. and the hazard insurance premium is $2,110. When Erica signed the original contract, she put down a deposit of $5,000. which will be credited to her down payment. In addition, at the time of closing. Erica must pay the following expenses:

Appraisal fee $215
Credit report $65
Roof inspection $50
Mongage insurance premium of amount financed
Title search $125
Attorney's fees $680
Escrow fee $210
Prepaid interest $630

As Erica’s real estate broker, she has asked you the following questions:

What is the total monthly PITI of the mortgage loan?

What is the total amount of interest that will be paid on the loan?

How much is due from Erica at the time of the closing?

If your real estate office is entitled to a commission from the seller of 6 1 2 % of the price of the home, how much commission is made on the sale?

(a)

To determine

To calculate: The total monthly PITI of the mortgage loan if the Principal amount is $235,000. The down payment is 20%. The duration in which the balance amount is going to be financed 15-years fixed-rate mortgage at 8.75% and 312 discount points. The annual property tax is $5,475, and the hazard insurance premium is $2110, Erica signed the original contract with deposit of $5,000.

Explanation

Given Information:

The Principal amount is $235,000. The down payment is 20%. The duration in which the balance amount is going to be financed 15-years fixed-rate mortgage at 8.75% and 312 discount points. The annual property tax is $5,475, and the hazard insurance premium is $2110, Erica signed the original contract with deposit of $5,000.

Erica must pay the following expenses,

Appraisal fee is $215. Credit report is $65. Roof inspection is $50. Title search is $125.

Attorney’s fees is $680. Escrow fees is $210$. Prepaid Interest is $630$.

Formula used:

The following step are used to find the monthly mortgage payment by using an amortization table:

Step-1 Find the number of $1,000s financed.

Number of $1,000s financed=Amount finanaced1,000

Step-2 Using Table 14-1, locate the table factor, monthly payment per $1,000s financed, at the intersection of the number-of –year column and thee interest rate row.

Step-3 Calculate the monthly payment.

Monthlypayment=TableFactor×No Of 1000's inthePrinciple

The total interest of the loan.

TotalInterest=(MonthlyPayment×No.Of Payments)AmountFinanced

Calculation:

Consider the principle amount $235,000. The down payment is 20%

(b)

To determine

To calculate: The interest paid over life of loan if the principal amount is $235,000. The down payment is 20%. The duration in which the balance amount is going to be financed 15-years fixed-rate mortgage at 8.75% and 312 discount points. The annual property tax is $5,475, and the hazard insurance premium is $2110, Erica signed the original contract with deposit of $5,000.

(c)

To determine

To calculate: The total amount of Interest that will be paid on the loan if the principal amount is $235,000. The down payment is 20%. The duration in which the balance amount is going to be financed 15-years fixed-rate mortgage at 8.75% and 312 discount points. The annual property tax is $5,475, and the hazard insurance premium is $2110, Erica signed the original contract with deposit of $5,000.

(c)

To determine

To calculate: The amount of commission made from the sale if real estate office is entitled to a commision from the selle of 612%. The principal amount is $235,000. The down payment is 20%. The duration in which the balance amount is going to be financed 15-years fixed-rate mortgage at 8.75% and 312 discount points. The annual property tax is $5,475, and the hazard insurance premium is $2110, Erica signed the original contract with deposit of $5,000.

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