The Williams are buying a house that costs $323,000 and can afford a 10% down payment. If the Williams want the lowest monthly payment, which loan option would you recommend? a. 15 year fixed, 5% down at a fixed rate of 5. 5% b. 30 year FHA, 3. 5% down at a fixed rate of 6. 25% c. 30 year fixed, 20% down at a fixed rate of 5. 75% d. 30 year fixed, 10% down at a fixed rate of 6% Please select the best answer from the choices provided A B C D.

Since the Williams want the lowest monthly payment, the loan option that is recommended is C. with 30 year fixed, 20% down at a fixed rate of 5. 75%.

Data and Calculations:

Cost of the house = $323,000

Down Payment = 10% or $32,300

Mortgage loan = $290,700 ($323,000 - $32,300)

a. 15 year fixed, 5% down at a fixed rate of 5. 5%

Cost of the house = $323,000

Down Payment = 5% or $16,150

Mortgage loan = $306,850 ($323,000 - $16,150)

Period of loan = 15 years

Fixed interest rate = 5.5%

Monthly Pay: $2,507.22

Total of 180 Mortgage Payments $451,299.70

Total Interest $144,449.70

b. 30 year FHA, 3. 5% down at a fixed rate of 6. 25%

Monthly Pay: $1,919.16

House Price $323,000.00

Loan Amount $311,695.00

Down Payment $11,305.00

Total of 360 Mortgage Payments $690,897.50

Total Interest $379,202.50

c. 30 year fixed, 20% down at a fixed rate of 5. 75%

Monthly Pay: $1,507.95

House Price $323,000.00

Loan Amount $258,400.00

Down Payment $64,600.00

Total of 360 Mortgage Payments $542,862.81

Total Interest $284,462.81

d. 30 year fixed, 10% down at a fixed rate of 6%

Monthly Pay: $1,742.89

House Price $323,000.00

Loan Amount $290,700.00

Down Payment $32,300.00

Total of 360 Mortgage Payments $627,441.62

Total Interest $336,741.62

Thus, since the Williams want the lowest monthly payment, the loan option that is recommended is C. with 30 year fixed, 20% down at a fixed rate of 5. 75%.

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