Answer:
218,500 - (3.5% down payment) =
210,852.50
30 years = 360 months
rate 6.5%
Use the loan payment formula (REALLY complex - see attached).
rate = 6.5/1,200 = 0.005416667
monthly payment = (rate + [rate / (((1 + rate)^months) -1)] * principal
monthly payment = (0.005416667 + [0.005416667 / (((1.005416667)^360)-1)] * principal
monthly payment = (0.005416667 + [0.005416667 / (((1.005416667)^360)-1)] * principal
monthly payment = 0.005416667 + [(0.005416667 / 6.9917988084 -1)] * 210,852.50
monthly payment = 0.005416667 + [(0.005416667 / 5.9917988084)] * 210,852.50
monthly payment = 0.005416667 + [(0.005416667 / 5.9917988084)] * 210,852.50
monthly payment = (0.005416667 + 0.0009040135) * 210,852.50
monthly payment = 0.0063206805 * 210,852.50
monthly payment = 1,332.73
Answer is a.