Estimate the affordable monthly mortgage payment, the affordable mortgage amount
ID: 1169882 • Letter: E
Question
Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the affordable home purchase price for the following situation. Use Exhibit 7-6, Exhibit 7-7. (Round your intermediate and final answers to the nearest whole dollar.)
2.
Based on Exhibit 7-7, what would be the monthly mortgage payments for each of the following situations? (Round your answers to 2 decimal places.)
Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the affordable home purchase price for the following situation. Use Exhibit 7-6, Exhibit 7-7. (Round your intermediate and final answers to the nearest whole dollar.)
Exhibit 7-6 Housing Affordability and Mortgage Qualification Amounts Example A Example B Step 1: Determine your monthly gross income (annual income divided by 12) $48,00012 $48,00012 Step 2: With a down payment of at least 5 percent, lenders use 33 percent of monthly gross income as a guideline for PITI (principal, interest, taxes, and insurance) and 38 percent of monthly gross income as a guideline for PITI plus other debt payments $4,000 X 0.38 $1,520 $ 4,000 X 0.33 $1,320 -380 Step 3: Subtract other debt payments (e.g., payments on an auto loan) and an estimate of the monthly costs of property taxes and homeowner's insurance -300 $840 - $ 7.3.4 300 $1,020 $ 7.34 Step 4: Divide this amount by the monthly mortgage payment per $1,000 based on current mortgage rates-an 8 percent, 30-year loan, for example (see Exhibit 7-7)-and multiply by $1,000 x $ 1,000 × $ 1,000 (b) Affordable mortgage amount $114,441 $138,965 Step 5: Divide your affordable mortgage amount by 1 minus the fractional portion of your down payment (e.g., 1 0.1 with a 10 percent down payment) 0.9 0.9 (c) Affordable home purchase price $127,157 $154,405Explanation / Answer
Solution :- 1) a) Calculation of affordable monthly mortgage payment Particulars Amount "$" i) Monthly gross income $3,480 ii) 38% of monthly gross income for principal , interest , taxes and insurance $1,322 iIi) Less:- Other debt $240 iv) Less:-Property taxes and insurance $200 Affordable monthly mortgage payment (ii-iii-iv) $882 b) Calculation of affordable mortgage amount:- Affordable mortgage amount = (Affordable monthly payment *1000)/Current mortgage rate (5%,20 year) From the exhibit 7-7 we have current mortgage rate (5%,20 year)= 6.60 Now substituting the value we got Affordable mortgage amount = (882.00*1000)/6.60 =$133,636.36 ie$133,636 c) Affordable home payment =Affordable mortgage amount/ 0.9 =$133,636/.90 =$148,484.44 i.e. $148,484 2) Based on Exhibit 7-7, calculation of the monthly mortgage a) A $145,500, 20-year loan at 7.5 percent. =$145,500*8.06/1000 = $1,172.73 i.e $1,173 b) A $220,500, 25-year loan at 7.5 percent. =$220,500*7.39/1000 =$1629.495 ie $1629 c) A $176,000, 30-year loan at 7.5 percent. =$176,000*6.99/1000 =$1230.24 ie $1230 Note:- All intermediate and final answers are rounded up to nearest whole dollor as per question . Please feel free to ask if you have query in the comment section.
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