Question

Giselle wants to buy a condo that has a purchase price of $163,000. Giselle earns $2,986 a month and wants to spend no more than 25% of her income on her mortgage payment. She has saved up $33,000 for a down payment. Giselle is considering the following loan option: 20% down, 30 year at a fixed rate of 6. 25%. What modification can be made to this loan to make it a viable option, given Giselle’s situation? a. Change to a 15 year fixed loan b. Change the interest to 5. 5% c. Change the down payment to 18% down d. None. This is a viable option for Giselle. Please select the best answer from the choices provided A B C D.

Answer 1

The viable option that Giselle has would be to Change the interest to 5.5%.

The reason why this is the answer.

An interest rate of 5.5% is the best option because it is the one that would have her spending less of her income.

• A 15 year fixed loan would have her paying for a period of 15 years.
• An 18% down payment is $0.18*163000$ = $29340

This amount is more than what she makes monthly. Hence it would be more viable at 5.5% interest.

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