question archive Tom and Nancy want to buy a house in a particular neighborhood
Tom and Nancy want to buy a house in a particular neighborhood
Subject:EconomicsPrice:2.87 Bought7
Tom and Nancy want to buy a house in a particular neighborhood. They have two children ages 1 and 4. The average price home in this neighborhood runs about $350,000. Together their family income is $100,000. They have saved $75,000. The home they want to purchase is a newly constructed dwelling that costs $300,000. Taxes on the home run $3.00 per $100 of assessed value of the home. For new homes the assessed value is equal to 75% of the purchase price. Insurance runs half of one percent of the home's assessed value. The down payment for a 30-year conventional loan will be 20%. Down payment for a 5. year ARM will be 10%.
Calculate the monthly costs for taxes and insurance costs based on values provided in the above Scenario.
a. What will the cost of insurance be per month?
b. What will their taxes be per month?
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Answer:
(a):-
Cost of insurance is half of one percent of the purchase price of the home.
So, 1/2% of $300,000 = $1,500
(b):- Taxes on home run $3 per $100 of assessed value of home i.e. Assessed value*$3/$100
Assessed value = 75% Purchase price of home
So, tax = $210,000*($3/$100) = $6300
