Definitions
A type of loan used to purchase or maintain a house, land, or other types of real estate
Mortgage
The Pre-qualification for a loan or mortgage of a certain value range
Pre-Approval
Housing Expense Ratio
(Total monthly housing expenses/monthly gross income)x100
Sue has a monthly gross income of $4,500. her monthly debt payments total $1,200. What is Sue's Debt-to-Income ratio to the nearest tenth?
26.7%
Lisa has a monthly gross income of $2,300. Her rent and utilities are $500 a month. She pays $87 for homeowners insurance and $62 in property taxes. Calculate her housing expense ratio.
28.2%
Coverage for damage to your home, property, personal belongings, and other assets in your home
Homeowners Insurance
The ratio that says you can afford to pay up to a certain percent of your monthly gross income in house payments
Housing Expense Ratio
Debt-to-Income Ratio
(total monthly debt payments/monthly gross income)x100
Mark has a monthly gross income of $3,000. His monthly housing expenses total $750. Calculate his Housing expense ratio to the nearest tenth.
25%
What is the formula for Simple Interest?
Simple Interest= principal x rate x time
The financial institution that loaned you money for your mortgage
Mortgage Lender
An initial up-front partial payment that reduces the amount of the loan or mortgage
Down Payment
Down Payment
Down Payment=Purchase Price x Down Payment Percent
Brad is planning on buying a house for $325,000. He wants to make a 17% down payment. How much will he need for the down payment?
$55250
Jim and Barbara obtained a 15-year $102,300 mortgage loan. The interest rate is 8%. Their monthly payment is $940.93. After their 50th payment, they have a principal balance of $84,825.06 For the 51st payment, what is the interest? What is the payment to the principal? What is the new principal?
Simple Interest=$563.24
Payment to principal=$414.39
New Principal= $84,410.67
The ratio that says your house payments should not be more than a certain percent of your overall debt
Debt-to-Income Ratio
A table that shows the breakdown of interest and principal paid for each payment in your loan term. It also shows the new principal balance after each payment
Amortization Schedule
Fixed-Rate Monthly Mortgage Payments
Monthly Payment=(principal + Interest)/ # of months
Brooke bought a home for $275,000. She made a $17,000 down payment and financed the rest with a 15-year fixed rate mortgage at 6%. Calculate Brooke's monthly mortgage payment.
principal=$258,000
interest=$232,200
Monthly payment=$2,723.33
What is the formula for New Principal?
New Principal=previous balance-payment to principal
A loan that starts with lower than average interest rates that increase at specific points in time
Adjustable-Rate Mortgage
A loan that has the same interest and the same monthly payment as long as you have the loan
Fixed-Rate Mortgage
Payment to Principal
Payment to principal=monthly payment-interest
Carla obtained a 15-year $78,400 mortgage loan. The interest rate is 12%. Her monthly payment is $940.93. For the first payment, what is the interest? What is the payment to the principal? What is the new principal?
Simple Interest= $780.86
Payment to principal= $160.07
New Principal= $78,239.93
Nathan has an annual gross income of $120,000. His monthly housing expenses total $2,950. Calculate his Debt-to-Income ratio to the nearest tenth.
29.5%