FINANCIAL LITERACY PROJECT

MTH 154 FINANCIAL LITERACY PROJECT Mortgaging a House Fall 2021Instructions: All information must be typed on the “MTH 154 Financial Literacy
Project Worksheet”. The worksheet can be downloaded from Canvas. The worksheet must be submitted through Canvas by October 18, 2021 All
attachments (such as detailed calculations for all numbers, copy of the sales ad, summary and picture of the house) must be submitted along with your
completed project. It must be neat and clear. Late submissions will not be accepted and will result in a grade of 0. Remember this project is worth 5% of your
course grade. EACH STUDENT MUST SUBMIT A COMPLETED PROJECT Introduction This project is designed to expose you to the terms and steps involved
in the process of applying for a loan to purchase a home, condominium or other property or real estate.Overview Find a house for sale that you can afford to
buy based only on your annual salary within Portsmouth, VA. Your property’s list price must be at least $100,000.00. Housing ads can be found in real estate
magazines, newspapers, or online. The real estate advertisement must be turned in with the project, and a picture of the house is required (if the ad does not
already have a picture, you must provide a picture of the house). In reality, a person would probably not pay the listed price in the ad to buy the house.
However, for the purpose of this project, assume that the listing price is the price that you pay. In 1-2 paragraphs, provide the rationale for picking your house.
For this project, round all final calculations to two decimal places.
Annual Salary Your annual salary is determined by adding the scores of your first two tests and multiplying by 399. If the sum of Test 1 and Test 2 is less
than 100, use 100 as the sum of Test 1 and Test 2. You must also pay state and federal taxes totaling 28% of your income. You will also have some money in
a savings account. This amount is determined by taking your highest test grade (from the first two tests) and multiplying by 201. The money in the savings
account will be used to help make a down payment on the house. The principal (P) amount of the mortgage (the amount borrowed) is found by subtracting
the down payment from the sales price. You do not have to use all of the money in the savings account for the down payment, but you must make a down
payment of some sort. Furthermore, your monthly payment (P& I) before taxes and insurance cannot exceed 34% of your gross monthly salary. Mortgage
Plan Your choice for mortgage plans is dependent on your down payment as a percentage of the total house price. The following table lists mortgage plans
offered by the bank. Your prime loan interest rate is adjusted depending on your credit score. Table 1 Prime Loan Interest Rate Loan Length Down payment
per house price 15 years 20 years 30 years 0 – 5.99% 3.35% 4.48% 4.85% 6 – 10.99% 3.26% 4.39% 4.76% 11 – 15.99% 3.19% 4.25% 4.69% 16% or more
3.12% 4.15% 4.52% Table 2 Adjusted Loan Interest Rate Determining Adjusted Loan Interest Rate Test 1 and Test 2 Average Credit Score Adjusted Rate 90
and above 800 Prime plus 0.00% 80-89.99 700 Prime plus 0.45% 70-79.99 600 Prime plus 0.65% 60-69.99 500 Prime plus 0.99% 59.99 and below 400 Prime
plus 1.95%
Example: If your test average is 71 (600 credit score) and you make a 17% down payment on a 30-year mortgage, then your adjusted loan interest rate based
on your credit score is 4.52% + 0.65% = 5.17% Table 3 Monthly Private Mortgage Insurance (PMI) If your down payment on a home is less than 20 percent of
the appraised value or sale price, your lender will require you to get mortgage insurance. A mortgage insurance policy protects your lender in case you default
on the payments. As a borrower, you pay the premiums, and the lender is the beneficiary. Percent of Down payment Monthly PMI 0 – 4.99% $150 5 – 9.99%
$130 10 – 14.99% $120 15 – 19.99% $95 20% or more $0 Monthly Payment Calculate the actual monthly payment (excluding insurance and property taxes),
the total amount paid on the loan, and the total interest paid to the bank for all three loan choices. Select a loan based on your findings. Provide the rationale
for the loan you selected. For the loan you select, calculate the monthly payment including the insurance and property taxes. Assume yearly homeowner’s
insurance costs 1.24% of the price of the home. The real estate tax rate (yearly) for property taxes is $1.49 per $100 dollars assessed value of the home.
Assume you will be living in the house and assume the assessed value of the house is the same as the listed price. Finally, attach a one full page summary of
your overall experience with the Mortgage Project. This paper is worth 10% of your overall project grade. DO NOT put your name or any other information at
the top of the page!!!!! This will cause you to lose 10 points!!!