Question

Hey I’m doing a project but I don’t get it at all but overall we’re doing a project about buying a home the estimate price of my home is overall $290,000 and I was told to pick two loan options for 30 years and 15 years

So the 30 year rate is 5.125% the APR 5.327 the upfront cost 8,268 and the monthly payment is 2,007 but overall the 8 year cost for this loan cost :$149,733

The 15 year rate is 4.125% APR is 4.444% and the upfront cost is $7,815
monthly payment is $2,750 but overall this 8 year cost $103,507


But I’m not getting what the question is saying on the picture

Answer 1

$14,500

Explanation:

There is a lot of information that is extraneous to answering this question (although it may be useful for answering later questions, as it looks like this is a multi-part question).

This question simply requests "Calculate the down-payment for the 30-year fixed mortgage."

So, we're focusing on the down-payment on the 30-year mortgage.

The paragraph immediately above the question states "Suppose you decide to make a down-payment of 5% of the purchase price for the 30-year fixed mortgage..." ... there's other information, but it's about mortgages that aren't 30-year mortgages, so we can safely ignore it.

The first paragraph in the picture shows information about a standard down payment (20%), and what happens if you decide to choose a down-payment that is less than standard (that's us... we chose 5% ... so let's pay attention closely here).

The information states that "...lenders charge extra... PMI that is added to the monthly payment." Note, that extra charge (PMI) is added to the monthly payment, not the down-payment. So, this information about PMI doesn't apply to the question in part (a).

So, for this question, the down payment is simply 5% of the purchase price.

Percentages can be interpreted as the # of parts out of 100, so in this case 5 out of 100, which is just another way of saying
`(5)/(100)`. Fractions, in turn, can be turned into decimal numbers simply by dividing the two, which gives 0.05. Many people interpret this simply as moving the decimal place on the percentage two digits to the left. In short, 5% = 0.05.

To find 5% of the purchase price, we simply multiply it to the purchase price, but we choose a form that is more conducive to doing the arithmetic, so either the fraction 5/100, or the decimal 0.05 (usually the decimal).

Given a purchase price of $290,000, 5% of $290,000 is

`0.05*\$290,000=\$14,500`