Question

A seller of the property listed at $200,000 excepted a 90% offer the home appraised at $185,000 and the buyers obtained a loan for 85% for 30 years at 5% interest what is the first months interest

Answer 1

$637.50

Explanation:

The appraised value is irrelevant. The lender will consider the lower of the appraised value or the agreed purchase price.

The term of the loan is also irrelevant. It is not an amortization problem.

The first month’s interest is $637.50.

Answer 2

$637.50

Explanation:

According to the Question,

• Given That, A seller of the property listed at $200,000 excepted a 90% offer the home appraised at $185,000 and the buyers obtained a loan for 85% for 30 years at 5% interest

Thus, the first months interest is

$200,000 list price x 0.90 = $180,000 contract sales price.

Since lender always uses the less of the appraised value or the contract sales price, use $180,00 for the remainder of the calculations.

• $180,000 contract sales price x 0.85 LTV = $153,000 loan.

• $153,000 loan x 0.05 interest rate = $7,650 annual interest.

• $7,650 ÷ 12 = $637.50 monthly interest payment for the first month.