HRE - 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 of home ownership? In this lesson, we will learn all about the pros and cons of home ownership and how to purchase your first home.
Monthly Payment Review
Let’s review how to calculate the monthly payment of a loan. Watch the following video and work along with the examples shown.
Mortgage Loan Type Activity
There are different types of mortgage loans available when purchasing a home. It is important to know the different attributes of each. Click through the interactive activity, or read the transcript below, to learn about the different options.
Click here to view the transcript of the above interactive activity. Links to an external site.
Closing Costs
When buying a new home it is typical that the buyer pays all 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 1: 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
Example 2: Try this one on your own and then check your answer below. You are approved for a mortgage loan of $131,000. The closing costs are listed below:
Closing Costs
Credit report: $45
Loan Origination fee: 2% of mortgage loan
Abstract of title: $120
Attorney fee: $250
Documentation Stamp: 0.3% of mortgage
Processing fee: 1.10% of the mortgage
What are the total closing costs?
Answer:
Loan Origination fee = 131,000 x 0.02 = $2,620
Documentation Stamp = 131,000 x 0.003 = $393
Processing fee = 131,000 x 0.011 = $1,441
Closing Costs = $45 + $2,620 + $120 + $250 + $393 + $1,441 = $4,869
Mortgage Loans Practice
⭐️ Help Video:
If you found any of these problems challenging, here is a video that will go over some of the answers.
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