Payment and income

Prepare an analysis and recommendation paper based on the following scenario:
I. Given for the case:
Housing payment to income (HTI) <36% Total Debt to income (DTI) < 43% Loans available: Conventional Loans requires 20% down payment, i. 30 year fixed rate mortgage= 4.00%; credit score > 680
ii. 10/1, rate is fixed for 10 years, then can adjust once per year thereafter, rate=3.625%, loan amortizes on a 30 schedule; credit score >720 2. Government Sponsored Loans requires at least 3.5%
down payment, minimum credit score 620 i. FHA 30 year fixed rate mortgage =3.875%; Mortgage insurance Premium= 0.055% of the loan amount and paid monthly ii. FHA 15 year fixed rate mortgage =3.125%
4) Real Estate appreciation in the local area is averaging 7.5% growth year over year 5) Real Estate property tax rate in the local area is 1.25% of the purchase price paid annually
A) Couple buying their first home:
Jane and John Doe are considering buying their first home. First they have to compare renting versus buying. Apartments near their work places go for $1,900 for a two bedroom, 2.0 baths. There is
no rent control for the area. Condominiums with similar square footage and number of bedrooms and bath rooms are selling for $300,000 with home owner association dues of $372 per month, which
includes property insurance.
Income and debt: Combined yearly income $90,000
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Credit card debt= $300/month Student loans= $920/month on $110,000 @ 8.00% Credit scores and savings: Equifax score = 740, 715, respectively Transunion = 690, 710, respectively Experian= 680, 685,
respectively Savings =$75,000
B) Determine:
Use worksheet 5.2 to help the Does determine the rent or buy decision Address the Doe’s credit scores in regards to the 5C’s from chapter 6, pgs. 219-222 How much house can the Does afford? Use
worksheet 5.3 from pgs. 192 and 193 What’s the best loan and calculate the principal, interest, taxes and insurance? If the down payment is 20%, what is the loan to value? What is the APR of the
loan? Show your calculation Develop an amortization schedule (optional) based on the best loan Under what circumstances would the 10/1 be a better loan for the couple? Under what circumstances
would the FHA loan be a better loan? If the Does paid an extra $250 per month and applied it to principal, how much interest would they save over the life of the loan? Graph the comparison of extra
payments versus no extra payment decline of the loan balance over time What type of Home Owners Insurance policy should the Does consider for their property? See Chapter 10, pages 384 to 388 C)
After five years the condominium has a comparative market value on Zillow for $435,000
How much would interest rates need to decrease to justify a refinance given a cost to refinance at $3,600 and the new mortgage will have a term of 30 years versus the 25 years that remain on the
current loan? Should the Does use the refinance opportunity to pay off their student loans and any credit card debt, thus adding to the principal? What would be the tax advantage of consolidating
the debt and adding the student loan to increase the mortgage principal? What is the payback period in months if there is a refinance, chart this information? How much total interest will be saved
if refinanced at the new rate?
Under what circumstances would the Does want a loan with a higher interest rate than their current loan?

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