Betty is contracting to purchase a new home. She contacts the loan office at her local bank to inquire about a mortgage loan.

Betty is contracting to purchase a new home. She contacts the loan office at her local bank to inquire about a mortgage loan. Betty explains that she wants to purchase a home at a contract price of $400,000. She also explains that she will have some expenses when she hires a lawyer to help her and when she contracts for a survey. The bank officer also points out that she will have the cost of a credit check and a number of other expenses as part of obtaining and closing on the proposed loan. The loan officer makes a good faith estimate of the total costs associated with the mortgage loan, including the information provided by Betty, to be about $4,500.

Betty indicates that she is fine with the cost of the loan and asks the bank officer if she can borrow $404,500. Should the bank officer approve a loan for the full amount?

The bank officer informs Betty that she will be charged 2 points on her loan. If Betty borrows $400,000, how much will the points be in dollars? If instead, she borrows $300,000, how much will the points be in dollars?

The bank officer tells Betty that he can get her a loan at 6% interest, but when Betty gets a disclosure from identifying the cost of her loan, it indicates that her interest APR on the loan is 6.5%. Betty contacts you to ask what her real interest rate is for this mortgage loan. Explain.

As Betty reviews the loan closing documents, she notices that she is being charged a certain amount of money for something identified as PMI. Explain to Betty what she is paying for and why