HOW - Mortgage Loans Lesson

Mortgage Loans

Introduction

Do you want to own a home, rent a home, or live in an apartment? How do you know if you can afford to purchase a home? What type of home loan can you qualify for? What are the advantages and disadvantages to home ownership? In this lesson, we will learn all about the pros and cons of home ownership and how to purchase your first home.

Review

Let’s review how to calculate the monthly payment of a loan. Watch the following video and work along with the examples shown.

In Your Notebook: Please take down important notes, such as formulas, and attempt the practice examples on your own before viewing the solutions!

Mortgage Loan Type Activity

There are different types of mortgage loans. It is important to know the different attributes of each. Click on the tabs to find out more about each mortgage type.

 

Closing Costs

When buying a new home it is usual for the buyer to pay closing costs at the time when the documents transferring ownership are signed. Closing costs include fees for lawyers, credit checks and title searches, taxes, and the preparation of the documents. Sometimes a closing cost is a flat fee, other times it is a percent of the amount of the loan.

Example:

The Harrisons have been approved for a mortgage of $208,000. The bank that is loaning them the money has the following closing costs: loan origination fee, 1.5% of the mortgage loan; title search, $150; appraisal report, $250; attorney fee, $325; property taxes, $1,280; and a survey, $400. What is their closing cost?

Find the loan origination fee.

Loan Origination Fee = $208,000 x 0.015

Loan Origination Fee = $3,120

Find the sum of the bank fees.

Closing Costs = $3,120 + $150 + $250 + $325 + $1,280 + $400

Closing Costs = $5,525

 

If you found any of these problems challenging, here is a video that will go over the answers.

 

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