X is considering buying a home for $180,000 (he must live in the Midwest). He is going to make a 20% down payment and borrow the rest. Real estate tax is $1,638 per year and insurance premiums are $275 per year.
a) What would be his monthly PITI if we assume a 5% interest rate and a 15 year mortgage (use table 8.1 on page 259 to calculate the principal and interest).
b) Would he qualify for this loan in light of the bank guidelines in question (1)?
c) Assume the same facts in question above and the same questions EXCEPT the term is 30 years at 6% instead of 15 years at 5%.
d) Name at least one advantage associated with the 15 year and the 30 year option.
Assuming X could not qualify for the 15 year loan could you come up with at least two things X might be able to do in order to qualify?
