Overview: In this assignment, you will compare and contrast financing options. When financing a home, it is important to understand your options. Each option comes with pros and cons, some of them ar

Overview:

 In this assignment, you will compare and contrast financing options. When financing a home, it is important to understand your options. Each option comes with pros and cons, some of them are short-term and some of them are long-term. The purpose of this assignment is to demonstrate your ability to understand a variety of financing options and develop amortization schedules and then use a series of subjective and objective criteria to analyze the short-term and long-term pros and cons to justify a decision.

 Instructions:

1. Choose a piece of real estate (residential, commercial, warehouse, land) using a resource such as realtor.com, zillow.com, etc. Provide the listing sheet or link.

 2. Determine a down payment percentage. A standard down payment is 20%. You may choose another percentage. a. Provide a justification for the down payment percentage you choose.

 3. Research two different financing options. For example, 15-year. fixed, 30-year. Fixed, 5-1 ARM, VA loan, etc. a. Use Excel, or another approved spreadsheet, and create a complete amortization schedule for the life of both financing options.

4. Compare and contrast the two financing options. a. Explain any background information and/or further description of loan types selected.

5. Identify the financing option you would choose. a. Provide a justification for your financing option selection. Requirements: · Numbers 1, 2, 4, 5 should be in a Word document. Number 3 should be an Excel, or another approved spreadsheet. Upload both documents to the link in the course. · Professional communication is expected, which includes proper spelling and grammar, and providing source information when using outside resources.

NOTES

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 on the Unit page 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.    The equations that you enter in the cells of the spreadsheet can only utilize basic arithmetic and exponent operations.  This way you are going to utilize what you learned in class.  The way to compute an exponent in Excel is to use the power function.  Excel has some very nice financial functions like IPMT and PMT which I suggest you use to check your equations but the spreadsheet you submit should NOT contain any of these.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. 

Additional notes

1.  The spreadsheet can be a separate file and does not have to be embedded in the main document.      2.  The equations that you enter in the cells of the spreadsheet can only utilize basic arithmetic and exponent operations.  This way you are going to utilize what you learned in class.  The way to compute an exponent in Excel is to use the power function.  Excel has some very nice financial functions like IPMT and PMT which I suggest you use to check your equations but the spreadsheet you submit should NOT contain any of these.   

3, And please remember that using an Internet source for the Excel spreadsheet  is of course not allowed.

Aside from that also make sure you choose two different mortgage types and not just variations of the same one.