Problem:
A person was considering buying a house priced at $350,000. A mortgage company claimed the interest rate for the 20-year loan is 3.5%. The company also estimated that the points and Appraisal, Credit Report, Processing, Document Preparation, Administration, Underwriting, Flood Certificate, Tax Service, Wire Transfer, and other fees would be $13,000 in total.
Requirement:
Question 1: What would be the monthly payment, if the person decided to borrow 90% of the cost of the house and 100% of the processing fees?
Question 2: What is the APR of the loan?
Question 3: If the person accepts the terms of the loan on Feb. 28, 2010, the first monthly payment is due on March 31. How much mortgage would be paid off after the payment on January 31, 2015?
Question 4: How much interest charge could this person claim for deduction in the 2014 Tax Return, i.e. the total interest occur during year 2014?
Note: Explain the solution in detail.