Question

A couple is buying a home for $300,000 with a 5 percent down payment. Their lender is requiring them to purchase mortgage insurance at the rate of 0.85 percent. How much will be added to their monthly principal, interest, taxes, and insurance (PITI) payment to cover the mortgage insurance?

Answer 1

To cover the mortgage insurance, the couple will need to add $212.50 to their monthly PITI payment.

Step-by-step explanation:

To calculate the amount added to their monthly PITI payment to cover the mortgage insurance, we need to find 5% of the home's purchase price first.

5% of $300,000 = $15,000.

Then, we need to calculate 0.85% of the mortgage amount to find the annual cost of the mortgage insurance.

0.85% of $300,000 = $2,550.

To find the monthly cost, we divide the annual cost by 12.

$2,550 / 12 = $212.50.

Therefore, the couple will need to add $212.50 to their monthly PITI payment to cover the mortgage insurance.