Question

13) Raymond and Kevin want to purchase a house. They offer $235,000 with 30% down payment. They are pre-qualified for a 30-year loan at 3.8%. Calculate their anticipated monthly payments.

Answer 1

Explanation:

The down payment is 30% of $235,000, which is $70,500. This means they are financing the remaining amount of $164,500.

Using the loan amount, interest rate, and loan term, we can calculate the monthly payment using the formula for a fixed-rate mortgage:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

where:

M = monthly payment

P = loan amount

i = monthly interest rate (annual rate divided by 12)

n = total number of payments (loan term in years multiplied by 12)

Plugging in the numbers, we get:

M = 164500 [ 0.038/12 (1 + 0.038/12)^360 ] / [ (1 + 0.038/12)^360 – 1]

Simplifying this expression, we get:

M = $765.84

Therefore, their anticipated monthly payments would be $765.84.