Explain how much would the dunns have to put down if the

Reference no: EM13477902

Evaluating a Mortgage Loan for the Dunns:

Michelle and Ken Dunn, both in their mid-20s, have been married for 4 years and have two preschool-age children. Ken has an accounting degree and is employed as a cost accountant at an annual salary of $62,000. They're now renting a duplex but wish to buy a home in the suburbs of their rapidly developing city. They've decided they can afford a $215,000 house and hope to find one with the features they desire in a good neighborhood.

The insurance costs on such a home are expected to be $800 per year, taxes are expected to be $2,500 per year, and annual utility bills are estimated at $1,440-an increase of $500 over those they pay in the duplex. The Dunns are considering financing their home with a fixed-rate, 30-year, 6% mortgage. The lender charges 2 points on mortgages with 20% down and 3 points if less than 20% is put down (the commercial bank the Dunns will deal with requires a minimum of 10% down). Other closing costs are estimated at 5% of the home's purchase price. Because of their excellent credit record, the bank will probably be willing to let the Dunns' monthly mortgage payments (principal and interest portions) equal as much as 28% of their monthly gross income. Since getting married, the Dunns have been saving for the purchase of a home and now have $44,000 in their savings account.

Critical Thinking Questions:

Q1. How much would the Dunns have to put down if the lender required a minimum 20% down payment? Could they afford it?

Q2. Given that the Dunns want to put only $25,000 down, how much would closing costs be? Considering only principal and interest, how much would their monthly mortgage payments be? Would they qualify for a loan using a 28% affordability ratio?

Q3. Using a $25,000 down payment on a $215,000 home, what would the Dunns loan-to-value ratio be? Calculate the monthly mortgage payments on a PITI basis.

Q4. What recommendations would you make to the Dunns? Explain.

Reference no: EM13477902

Questions Cloud

Write down a 2-page case summary using apa format with : write a 2-page case summary using apa format with in-text citations. in your summary be sure to include a discussion of

Knowing that eeo laws and regulations greatly impact hr : knowing that eeo laws and regulations greatly impact the hr environment share how job descriptions and job

Suggest a social issue in which youre interested it could : consider a social issue in which you are interested. it could be human freedom sexuality deviance crime social mobility

Prepare a 350- to 700-word paper in which you analyze : prepare a 350- to 700-word paper in which you examine popular american culture. in your essay answer the following

Explain how much would the dunns have to put down if the : evaluating a mortgage loan for the dunnsmichelle and ken dunn both in their mid-20s have been married for 4 years and

An important part of our course is researching information : an important part of our course is researching information on diversity and multiculturalism and its social cultural

Tri state pickle company preferred stock pays a perpetual : tri state pickle company preferred stock pays a perpetual annual dividend of 2 12 of its 100 par value. if investors

How will society through health care policy deal with the : how will society through health care policy deal with future issues such as cloning genome mapping and end-of-life

Department 65 consists of an issue of preferred stock which : department 65 has an issue of preferred stock that pays a dividend of 4.00. the preferred stockholders require a rate

User Account

All Pages