Finance
A Connecticut buyer obtains a 30-year fixed mortgage at 7.25% for $425,000. Using a payment factor of $6.83 per $1,000 borrowed, the monthly P&I payment is approximately:
A$2,903✓ Correct
B$2,952
C$2,825
D$3,027
Explanation
Monthly P&I = ($425,000 / $1,000) × $6.83 = 425 × $6.
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Key Terms to Know
Private Mortgage Insurance (PMI)
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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