You have selected the lender you will be using and completed the application process. You are excited to find out that your credit score was better than you originally thought when estimating how much you could spend on a house. You are being offered a lower interest rate than you were originally quoted on two different loan options. Both are 30 year, fixed rate mortgages with payments of $1,000 per month and origination fees equal to 2% of the loan amount. * hints 1) You are being offered loans with different terms than the loan you were working with in #2. The only information that should be carried forward from questions 1-4 is the amount of your down payment. (2) Assume these loans have zero PMI (3) you have additional money set aside to cover closing costs so you are using the full amount from #3 as a down payment.

• Loan A has an APR of 4% with no points.
• Loan B has an APR of 3.90% with 1.5 points.

What is your EBC if you select Loan A? Enter your answer as a whole number with 3 decimal points (no percent sign).

What is your EBC if you select Loan B? Enter your answer as a whole number with 3 decimal points (no percent sign).

Assuming you intend to stay in the house for 30 years, which loan should you choose? *hint: Answer using the calculations you did in questions 5 and 6 rather than relying on the rule of thumb about EBC and loan choices presented in the text and on the slides.

Loan A or Loan B

Assume you opt for Loan B. You decide to rent out a room in your new home to your best friend for $500 per month. If you add the extra money to your monthly house payment, how many years will it take you to pay off your mortgage?

A. 15.79 years

B. 17.72 years

C. 30 years

D. 158 years