Question

Laterfah and Eric Lewis have obtained a mortgage loan at a 5.5% annual interest rate for 25 years. The home's selling price is $175,000, and they need a 20% down payment. The bank will allow them to finance the closing costs as part of the mortgage. What is the actual amount financed with the mortgage? Find the closing cost and the total amount of the mortgage if the closing costs are financed.

Answer 1

The selling price of the house is $175,000 and they need to make a 20% down payment, so the down payment amount is:

Down payment = 20% x $175,000 = $35,000

To find the amount financed with the mortgage, we need to subtract the down payment from the selling price:

Amount financed = Selling price - Down payment

Amount financed = $175,000 - $35,000

Amount financed = $140,000

Next, we need to calculate the closing costs. Let's assume the closing costs are 3% of the selling price:

Closing costs = 3% x $175,000 = $5,250

Since the bank allows them to finance the closing costs as part of the mortgage, we need to add the closing costs to the amount financed:

Total amount of the mortgage = Amount financed + Closing costs

Total amount of the mortgage = $140,000 + $5,250

Total amount of the mortgage = $145,250

Therefore, the actual amount financed with the mortgage is $140,000, the closing costs are $5,250, and the total amount of the mortgage if the closing costs are financed is $145,250.