FIN 3300 Final Exam with Complete
Solutions
Determining the Max Loan - ANSWER-1. Principle + Interest (P + I)
2. Housing Insurance (HI)
3. Property Tax (PT)
4. Private Mortgage Insurance (PMI)
Maximum Purchase Price - ANSWER-(Loan)/(1 - Down Payment)
Savings Needed (Killer Step) - ANSWER-1. Down Payment * Max Purchase Price
2. Points * Loan
3. Housing Insurance * Max Purchase Price
4. Fees
5. Title Insurance * Loan
6. PMI * Loan
3 Rules needed to determine max loan - ANSWER-1. 28% of GROSS income
2. Housing Insurance = .3%
3. Property Taxes = 2.5%
Appraiser - ANSWER-someone provides and opinion of value on real estate
Value in Use - ANSWER-no sentimental value - appraisers typically are thinking in
these terms
Value in Exchange - ANSWER-some items are priceless - value can be pulled from
intangibles
Appraisers use these - ANSWER-1. Cost Approach
2. Income Approach
3. Sales Comparison Approach
Cost Approach - ANSWER-buyer would pay no more for a house than what it would
cost to build one just like it
Income Approach - ANSWER-the greater the income a building will produce, the greater
the value. Not applicable for owner occupied housing
Sales Comparison Approach - ANSWER-a person would pay no more for a particular
good from what you would have to pay for a close subsitute
Solutions
Determining the Max Loan - ANSWER-1. Principle + Interest (P + I)
2. Housing Insurance (HI)
3. Property Tax (PT)
4. Private Mortgage Insurance (PMI)
Maximum Purchase Price - ANSWER-(Loan)/(1 - Down Payment)
Savings Needed (Killer Step) - ANSWER-1. Down Payment * Max Purchase Price
2. Points * Loan
3. Housing Insurance * Max Purchase Price
4. Fees
5. Title Insurance * Loan
6. PMI * Loan
3 Rules needed to determine max loan - ANSWER-1. 28% of GROSS income
2. Housing Insurance = .3%
3. Property Taxes = 2.5%
Appraiser - ANSWER-someone provides and opinion of value on real estate
Value in Use - ANSWER-no sentimental value - appraisers typically are thinking in
these terms
Value in Exchange - ANSWER-some items are priceless - value can be pulled from
intangibles
Appraisers use these - ANSWER-1. Cost Approach
2. Income Approach
3. Sales Comparison Approach
Cost Approach - ANSWER-buyer would pay no more for a house than what it would
cost to build one just like it
Income Approach - ANSWER-the greater the income a building will produce, the greater
the value. Not applicable for owner occupied housing
Sales Comparison Approach - ANSWER-a person would pay no more for a particular
good from what you would have to pay for a close subsitute
