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Determine the down payment and the amount to be financed for each home described below. A)...

Question:

Determine the down payment and the amount to be financed for each home described below.

A) {eq}\$340,340; 10 \% {/eq} down

B) {eq}\$870,000; 20 \% {/eq} down

Loans

When taking a home loan, the entire cost of the house is not taken as a loan. Instead, a certain amount is paid upfront. This is the down payment. The rest is taken as a loan.

Answer and Explanation:


A) The downpayment will be 10% of the cost of the house. The amount to be financed will be the remaining amount. So,


$$\begin{align} \text{Downpayment}&=10\%*340340\\ &=\$34034\\ \text{Amount to be financed}&=340340-34034\\ &=\$306306 \end{align} $$


B) Similarly to A, we have:


$$\begin{align} \text{Downpayment}&=20\%*870000\\ &=\$174000\\ \text{Amount to be financed}&=870000-174000\\ &=\$696000 \end{align} $$


Learn more about this topic:

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Buying a House: Mortgage Types & Loan Length

from Finance 102: Personal Finance

Chapter 7 / Lesson 4
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