Finance
A Nevada home buyer obtains a 30-year fixed mortgage at 7% for $400,000. What is the approximate monthly principal and interest payment?
A$2,412
B$2,661✓ Correct
C$2,950
D$3,100
Explanation
Using the mortgage factor for a 30-year loan at 7% (approximately $6.653 per $1,000 borrowed): $400,000 ÷ 1,000 × 6.
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Key Terms to Know
Amortization
The 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.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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