Problem
Contributed by Paul R. McCright, University of South Florida
Amanda and Blake have found a house, which owing to a depressed real estate market costs only $201,500. They will put $22,000 down and finance the remainder with a 30-year mortgage loan from Bank of America at 4.65% interest (compounded monthly).
(a) How much is their monthly loan payment?
(b) How much interest will they pay in the second payment?
(c) They will also have the following expenses:property taxes of $2100, homeowners' insurance of $1625, and $290 mortgage insurance (in case one of them dies before the loan is repaid, a requirement of the bank). These annual amounts are paid in 12 installments and added to the loan payment. What will Amanda and Blake's full monthly cost be?
(d) If they can afford $1200 per month, can Amanda and Blake afford this house?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.