1) ) The Federal Home Loan Mortgage Corporation, known as Freddie Mac, is a public government-sponsored enterprise. Explore the Freddie Mac website: www.freddiemac.com
A) (1 point) From the homepage, scroll down and click “Get Weekly Rates”. On that page, Zoom to 1Y and set the date to 10/01/2019 to 10/01/2020. What was the interest rate charged on 30-year fixed rate mortgages, 15-year fixed rate, and 5/1 ARM for the week of January 30, 2020? Round your answer to the nearest hundredths place (2 decimals – this is how it should be provided).
i.) 30-year fixed rate _______ %
ii.) 15-year fixed _______ %
iii.) 5/1 ARM _________ %
B) (1 point) Click on the Homesteps link, which is the real estate sales unit of Freddie Mac.
Link:https://www.homesteps.com/featuresearch.html. From the homepage, search for a listing for sale in IL within the following price range: $350,000 – 500,000 and select the home closet to $350,000. (Note: there should not be a large list of options to choose from.)
Round to the nearest thousand.
i) What is the listed price $ ____________
ii) How much property taxes paid (If applicable) $__________
iii) HOA Fees (if applicable) ___________/month
C) (3 points) Use the “How much can you afford?” calculator to calculate the affordably this home using income. Suppose you have the following loan and borrowing info:
· Annual gross Income = $80,000
· Monthly debt = $250
· Down payment = $15,000
· Homeowners insurance = $1500/year
· Assumptions: debt to income ratio = 36%, housing ratio = 25%
i) Using your rounded answers (nearest 1000) from a) for the yearly taxes and monthly HOA fees (if applicable) to determine if you can afford the house with this income for the 30-year fixed loan rate from a) on the week of Janauary 30, 2020. (Yes or no). Explain
ii) How does (if at all) your answer change if the annual gross income is changd to $175,000.
D) (4 points) Now the fixed or adjustable rate calculator. Use the home info from b) to answer this question. Suppose you can afford a down payment of 10% and you expect to live in the home for 10 years. For both loans, assume the origination charge = $2000, the discount points = 1% and settlement services = $0.
For the 30-year 5/1 ARM, set the following adjustment terms:
· 6 months before first adjustment, 6 months between rate.
· Predict interest rates will decrease
· Maximum rate adjustment = 1%
· Margin = 2.75% , Index rate = 1.25 %,
· Minimum rate = 3%, Maximum rate = 7.5%
· Months between index adjustments = 1
· Index rate change between adjustments = 0%
Set the yearly property taxes, and HOA fees based on the reported values chosen in the property from b) and assume
· Homeowners insurance cost = $1,500
· State + federal tax rate = 30%.
· Savings rate =1%
i) Consider the the 30-year fixed rate and the 5/1 ARM from the week of January 30, 2020. Which loan will cost you more over the expected 10 years of living in the home?
ii) As the the number of expected years in the home increases, the loan cost will _____________ (increase, decrease, stay the same)
E) (4 points) Select the calculate affordability by payment and set the max payment to $2000/month. Keep the down payment, fixed interest rate and assumptions from above unchanged.
i) How much can you afford? Round to the nearest thousand
ii) What are the total monthly payments? Round to the nearest thousand
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