A Wisconsin homebuyer purchases a property in Oshkosh for $320,000 and makes a 20% down payment. The buyer obtains a mortgage for the remaining balance at an annual interest rate of 6%. What is the amount of interest the buyer will pay in the FIRST month of the loan?
Correct Answer
B) $1,280
Loan amount equals the $320,000 purchase price minus the 20% down payment: $320,000 - $64,000 = $256,000. First-month interest is the loan amount times the annual rate divided by 12: $256,000 x 0.06 / 12 = $1,280. The correct answer is B.
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Related Topics & Key Terms
Key Terms:
Related Concepts
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
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