Don's credit score is 777, while Zelda's credit score is 709. According to the following table for a $150,000 mortgage, how much more would Zelda have to pay per month than Don?
| FICO Score | Interest Rate | Monthly Payment |
|---|---|---|
| 720-850 | 5.59% | $860 |
| 700-719 | 5.71% | $872 |
| 675-699 | 6.25% | $924 |
| 620-674 | 7.40% | $1039 |
| 560-619 | 8.53% | $1157 |
| 500-559 | 9.29% | $1238 |
A. $12
B. $64
C. $52
D. $115
Answer (2)
Zelda pays $12 more per month than Don for their mortgage. Don's monthly payment is $860, while Zelda's is $872. The difference is calculated by subtracting Don's payment from Zelda's payment ($872 - $860 = $12).
;
Find Don's monthly payment: Based on a FICO score of 777, Don pays $860.
Find Zelda's monthly payment: Based on a FICO score of 709, Zelda pays $872.
Calculate the difference: Subtract Don's payment from Zelda's payment: $872 - $860 = $12.
State the final answer: Zelda pays $\boxed{ 12} more per month than Don.
Explanation
Understanding the Problem We are given a table that shows the monthly payment for a $150,000 mortgage based on FICO score. Don's credit score is 777, and Zelda's credit score is 709. We need to find the difference in monthly payments between Zelda and Don.
Finding Don's Monthly Payment First, we need to find the monthly payment for Don based on his credit score of 777. According to the table, a FICO score of 720-850 corresponds to a monthly payment of $860. Since Don's credit score is 777, his monthly payment is $860.
Finding Zelda's Monthly Payment Next, we need to find the monthly payment for Zelda based on her credit score of 709. According to the table, a FICO score of 700-719 corresponds to a monthly payment of $872. Since Zelda's credit score is 709, her monthly payment is $872.
Calculating the Difference Finally, we need to find the difference in monthly payments between Zelda and Don. This is calculated as Zelda's monthly payment minus Don's monthly payment: $872 - $860 = $12.
Final Answer Therefore, Zelda would have to pay $12 more per month than Don.
Examples
Understanding how credit scores affect mortgage payments is crucial in real life. For instance, consider two friends, Alex and Ben, who are planning to buy a house. Alex has a credit score of 780, while Ben has a credit score of 710. Based on the given table, Alex would pay $860 per month for a $150,000 mortgage, while Ben would pay $872 per month. Over the course of a 30-year mortgage, this small monthly difference can add up to a significant amount, highlighting the importance of maintaining a good credit score to secure better interest rates and lower monthly payments. The total difference paid over 30 years would be calculated as follows:
Monthly difference: $872 - $860 = $12 Yearly difference: $12 \times 12 = $144 Total difference over 30 years: $144 \times 30 = $4320
This example illustrates how a seemingly small difference in credit scores can result in substantial savings over the life of a mortgage. Therefore, maintaining a good credit score is essential for securing favorable financial terms when purchasing a home.
