Home mortgage loans Assignment

Question 1
A house is for sale for $250,000. You have a choice of two 20-year mortgage
loans with monthly payments: (1) if you make a down payment of $25,000,
you can obtain a loan with a 6% rate of interest or (2) if you make a down
payment of $50,000, you can obtain a loan with a 5% rate of interest. What
is the effective annual rate of interest on the additional $25,000 borrowed on
the first loan?
Group of answer choices
1.00%
6.00%
12.95%
18.67%
Question 2
A borrower has secured a 30 year, $150,000 loan at 7% with monthly
payments. Fifteen years later, the borrower has the opportunity to refinance
with a fifteen year mortgage at 6%. However, the up front fees, which will be
paid in cash, are $2,500. What is the return on investment if the borrower
expects to remain in the home for the next fifteen years?
Group of answer choices
6.00%
13.00%
22.62%
28.89%
Question 3
A borrower has secured a 30 year, $150,000 loan at 7% with monthly
payments. Fifteen years later, an investor wants to purchase the loan from
the lender. If market interest rates are 5%, what would the investor be
willing to pay for the loan?
Group of answer choices
$75,000.00
$111,028.00

$126,196.48
$168,646.00
Question 4
A borrower is purchasing a property for $180,000 and can choose between
two possible loan alternatives. The first is a 90% loan for 25 years at 9%
interest and 1 point and the second is a 95% loan for 25 years at 9.25%
interest and 1 point. Assuming the loan will be held to maturity, what is the
incremental cost of borrowing the extra money?
Group of answer choices
13.66%
13.50%
14.34%
12.01%
Question 5
The market value of a loan is:
Group of answer choices
The loan balance times one minus the market rate
The loan balance times one minus the original rate
The future value of the remaining payments
The present value of the remaining payments
Question 6
A conforming loan
Group of answer choices
Exceeds the loan limits of loans that Fannie Mae and Freddie Mac can buy
Meets loan limits of loans that Fannie Mae and Freddie Mac can buy