. Assume that you are a bank manager for a large bank Sam Smith, a new...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
. Assume that you are a bank manager for a large bank Sam Smith, a new client of yours, is interested in obtaining a mortgage from you. This will be Sam's first home purchase. Sam has been working full-time for 4 years as an insurance agent. Sam does not have a spouse, partner or children. Sam's real estate agent recently showed him the perfect home. This house is large, beautiful and is located in Sam's favourite part of town, Sam's real estate agent believes that the current homeowners will agree to sell their home for $450,000 Sam has $50,000 in cash to pay as a down payment on the home. Sam will need to obtain a mortgage to pay for the remainder of the home. After discussing these facts with Sam, you provide him with the following suggestions: You recommend to Sam that the mortgage be amortized over 25 years You also recommend a five-year, fixed mortgage, in order to lock in the current interest rate for 5 years, in case interest rates increase further in future years. The current five-year fixed mortgage interest rate is 4 percent, compounded semi-annually. Additional information pertaining to Sam's mortgage application includes the following: Sam's credit score is 700. Sam's monthly gross income is $8,000. The expected monthly mortgage payments will be $2,104 per month on a mortgage of $400,000, at 4% per year for 5 years. Other monthly expenses related to the house are expected to be as follows: 1. H. II. L 8. Background Assume that you will use the following two key criteria to determine whether you can offer Sam a mortgage of $400,000: L II. Part (b) 1. heating costs = $120 property taxes = $250, and, Sam also pays $500 per month towards his Visa debt. REQUIRED: Part (a) 11. Sam's current credit score, and Results of the debt ratio analysis. Explain what a credit score is. List and describe five (5) factors that were used to determine Sam's credit score. Use the above case information to calculate Sam's Gross Debt Service Ratio (GDSR). Using the Sam's credit score and Gross Debt Service Ratio, is the bank likely to approve the . Assume that you are a bank manager for a large bank Sam Smith, a new client of yours, is interested in obtaining a mortgage from you. This will be Sam's first home purchase. Sam has been working full-time for 4 years as an insurance agent. Sam does not have a spouse, partner or children. Sam's real estate agent recently showed him the perfect home. This house is large, beautiful and is located in Sam's favourite part of town, Sam's real estate agent believes that the current homeowners will agree to sell their home for $450,000 Sam has $50,000 in cash to pay as a down payment on the home. Sam will need to obtain a mortgage to pay for the remainder of the home. After discussing these facts with Sam, you provide him with the following suggestions: You recommend to Sam that the mortgage be amortized over 25 years You also recommend a five-year, fixed mortgage, in order to lock in the current interest rate for 5 years, in case interest rates increase further in future years. The current five-year fixed mortgage interest rate is 4 percent, compounded semi-annually. Additional information pertaining to Sam's mortgage application includes the following: Sam's credit score is 700. Sam's monthly gross income is $8,000. The expected monthly mortgage payments will be $2,104 per month on a mortgage of $400,000, at 4% per year for 5 years. Other monthly expenses related to the house are expected to be as follows: 1. H. II. L 8. Background Assume that you will use the following two key criteria to determine whether you can offer Sam a mortgage of $400,000: L II. Part (b) 1. heating costs = $120 property taxes = $250, and, Sam also pays $500 per month towards his Visa debt. REQUIRED: Part (a) 11. Sam's current credit score, and Results of the debt ratio analysis. Explain what a credit score is. List and describe five (5) factors that were used to determine Sam's credit score. Use the above case information to calculate Sam's Gross Debt Service Ratio (GDSR). Using the Sam's credit score and Gross Debt Service Ratio, is the bank likely to approve the
Expert Answer:
Answer rating: 100% (QA)
Part a i A credit score A credit score is a numerical representation of an individuals creditworthin... View the full answer
Related Book For
Principles of Auditing and Other Assurance Services
ISBN: 978-0078025617
19th edition
Authors: Ray Whittington, Kurt Pany
Posted Date:
Students also viewed these accounting questions
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
You have completed your first meeting with Harper and Riley Evans. You are confident that you now have most of the information you will need to prepare a comprehensive financial plan for them. Beyond...
-
The surveyor's formula (also called the Shoelace formula or Gauss's area formula) is a handy tool for computing the area of polygonal regions in the plane. For a triangle, it says the following:...
-
The author criticizes the selection of engineers for projects. Is the author saying engineers dont make good project managers?
-
Decide whether each relation defines a function. {(9, -2), (-3, 5), (9, 1)}
-
Calculate the maximum power and LCOE for a parabolic collector similar to that in Example 8.1, but assume that an evacuated tube receiver is used (case E in Figure 8.18a). Example 8.1 Figure 8.18...
-
United Savings Bank (USB) is examining the profitability of its Premier Account, a combined savings and checking account. Depositors receive a 7% annual interest rate on their average deposit. USB...
-
In the figure, block 1 of mass m slides from rest along a frictionless ramp from height h = 2.7 m and then collides with stationary block 2, which has mass m = 2m1. After the collision, block 2...
-
Goodfellow & Perkins LLP is a successful mid-tier accounting firm with a large range of clients across Texas. During 2025, Goodfellow & Perkins gained a new client, Brookwood Pines Hospital (BPH), a...
-
Alberto and Cristina were partners in a travel agency that specialized in arranging corporate travel. Because the partnership was on the verge of bankruptcy, they invited Albertos cousin, Mark, to...
-
Government has provided a way for people to file their tax returns on the Internet to make filing easier and raise compliance. Is this an example of a libertarian paternalistic policy? Explain your...
-
How are the contestable market model and the cartel model of oligopoly related?
-
In Taxland, the first $10,000 earned per year is exempt from taxation. Between $10,000.01 and $30,000, the tax rate is 25 percent. Between $30,000.01 and $50,000, its 30 percent. Above $50,000, its...
-
Is a contestable model or cartel model more likely to judge an industry by performance? Explain your answer.
-
In his book Why Perestroika Failed: The Politics and Economics of Socialist Transformation, Austrian economist Peter Boettke argues that Soviet-style socialist countries had to fail because they...
-
For each transformation below, a C-C bond forming strategy is required to complete the synthesis. (a) Identify the C-C formation strategy that will be effective from the list below and write it on...
-
we have to compute the letter grades for a course. The data is a collection of student records stored in a file. Each record consists of a name(up to 20 characters), ID (8 characters), the scores of...
-
Describe how the organizational status of the internal audit department affects its independence.
-
The accounts receivable section of the accounting department in Wind Power, Inc., maintains subsidiary ledgers that are posted from copies of the sales invoices transmitted daily from the billing...
-
Compare the rights of plaintiffs under common law with the rights of persons who purchase securities registered under the Securities Act of 1933 and sustain losses. In your answer, emphasize the...
-
Determining whether a subsequent event requires an adjustment to the financial statements is difficult in many circumstances. Discuss the primary difference between subsequent events that require...
-
For each of the following events concerning disclosure of events that took place after year end, discuss the manner in which it should be disclosed in the financial statements or the audit report....
-
Each of the following techniques for managing earnings was described in the chapter: - "Big Bath" charges - Write-off of acquired assets - "Cookie Jar" reserves - Abuse of materiality - Questionable...
Study smarter with the SolutionInn App