# Mortgage System Analysis- HELP NEEDED ASAP!

Anonymous
timer Asked: Jun 8th, 2013

Question description

Here is some more information regarding the project assigned. The project was designed to allow you to learn a bit about how the mortgage system works.  I would suggest preparing the analysis from the perspective of the institution loaning the money. In this way you will need to design the financing options with the highest probability of getting your money back.

First of all, you should read the instructions below carefully. Also, read the Rubric so you know how I will grade the projects. In addition to what is written, here are some further explanations for the five parts listed in the project.

Part 1: After you choose a property, determine all the extra monthly payments the buyer will have associated with the particular property. These are items like taxes, insurance, property fees, access fees, etc… You will need to take these into consideration when designing the financing options.

Part 2: Down payments are meant to protect the lender. It should be enough so it covers any costs and losses if there is a foreclosure early on in the term. But it shouldn’t be too high so the buyer can’t afford it. You need to think this through and you must justify any selection you make.

Part 3: There are many financing options available: fixed rate, variable rate, loans with points, balloon loans, just to name a few. The Wikipedia page http://en.wikipedia.org/wiki/Mortgage_loan has a nice description. I would like you to choose two different options and not just two variations of the same type. You should provide a detailed description of the options chosen.  For example, you could choose a 30 year fixed mortgage and a 15 year ARM. This part is worth 10 points so make sure you have two different mortgages.

Part 4: Here you lay out the details of the two financing options you selected.  Aside from presenting the details of the loans, provide information about the impact of the two options on the buyer. For example, what are the short and long term difference? How will increases in the cost of living effect the buyer? What will happen if the interest rate suddenly increases? Don’t forget, you want your money back plus the interest so think through what crazy things could happen in 15, 20, or 30 years.  You must create the spreadsheet yourself. Simply including a spreadsheet you copied off the Internet will not suffice. This part is worth 15 points so please do the work yourself.

Part 5: Here you will write an analysis of the two mortgage options. You should discuss in detail how each option will impact the buyer in the short and long term. I would like to see at least a half page of analysis. This part is worth 15 points and I will grade based on the effort you put into it.

I am expecting a Word document that has all five parts written out and an Excel spreadsheet that has the calculations for your two different mortgage options.  As with all your college reports, the Word document should be APA formatted. If you are not familiar with the APA formatting guidelines you should spend some time on the Post Writing Center learning about it.

project: (due at the end of Unit 6)

Part I:

Select a piece of real estate (residential, commercial, warehouse, land), any number of resources can be used (www.realtor.com is one option). You will need to include a listing sheet/link with your submitted assignment.

Part II:

Determine a down payment. (a standard down payment is 20%, however you may offer justification for any amount/percentage you choose)

Part III:

Research 2 different financing options.

Part IV:

Use Excel (or other approved spread sheet) to create an amortization schedule for the life of both financing options.

Part IV:

Write an analysis that compares and contrasts the two financing options in detail. Be specific. Include justifications for selecting an option.

Project Scoring Rubric:

 Project Contents Points A real estate listing sheet 5 A description, explanation, or calculation of the down payment for the property 5 A description of the two financing options/products being compared. 10 An excel spread sheet containing side by side amortization schedules. 15 Written analysis (15 points total) APA format - Explanation of any background information and/or further description of loan types selected 5 - Analysis of the similarities and differences in the amortization schedules 5 - Justification for selection of either option 5 - Use of proper grammar, spelling, sentence structure and paragraph structure 5 Total 50

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