Question

The Williams are buying a house that costs $323,000 and can afford a 10% down payment. If the Williams want the lowest monthly payment, which loan option would you recommend? a. 15 year fixed, 5% down at a fixed rate of 5. 5% b. 30 year FHA, 3. 5% down at a fixed rate of 6. 25% c. 30 year fixed, 20% down at a fixed rate of 5. 75% d. 30 year fixed, 10% down at a fixed rate of 6% Please select the best answer from the choices provided A B C D.

Answer 1

For the Williams family, the best mortgage option to achieve the lowest monthly payment is Option D, a 30-year fixed mortgage with a 10% down payment and an interest rate of 6%.

Step-by-step explanation:

The Williams family is buying a house that costs $323,000 and can afford a 10% down payment. To choose the loan option that will result in the lowest monthly payment, we need to consider both the down payment and the interest rate of the loan. With a 10% down payment, the Williams would be paying $32,300 upfront, leaving a loan amount of $290,700.

Each loan option has different factors to weigh:

• Option A (15 years, 5.5% rate) will have a higher monthly payment due to its shorter term.
• Option B (30 years FHA, 6.25% rate, 3.5% down) offers a lower down payment but a higher interest rate, which could result in higher total cost over the life of the loan.
• Option C (30 years, 5.75% rate, 20% down) requires a much higher down payment that the Williams might not be able to afford.
• Option D (30 years, 6% rate, 10% down) matches their available down payment and offers an extended payment period which typically results in the lowest monthly payment.

Therefore, Option D would be the recommended loan option for the Williams if their goal is to have the lowest monthly payment.