Estimate the affordable monthly mortgage payment, the affordable mortgage amount

Question

Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the affordable home purchase price for the following situation. Show your calculations in the table below.

Monthly gross income: $2,950

Other Debt, monthly payment: $160

Down payment to be made: 15% of purchase price

Monthly property tax and insurance: $210

30-year mortgage at 6%

Enter your calculation and response in this column.

Step 1. Start with the monthly gross income.

$2,950

Step 2. Multiply Step 1 by .33 (which is the decimal form of 33%) for a PITI (principal, interest, taxes, and insurance) guideline.

Step 3. Subtract “Other Debt” payments from the result of Step 2 to determine the Affordable Monthly Mortgage Payment.

Step 4. Divide the result of Step 3 by 6.00 (this is the mortgage payment factor from Exhibit 7-7 based on a 30-year loan at 6%) and then multiply this by $1,000.

This is the Affordable Mortgage Amount.

Note: Does this amount seem reasonable for this scenario? If not, double-check your calculations.

Step 5. Divide the affordable mortgage amount by .85 (This is 1 minus the down payment percentage) to determine the Affordable Home Purchase.

Note: Does this amount seem reasonable for this scenario? If not, double-check your calculations.

Enter your calculation and response in this column.

Step 1. Start with the monthly gross income.

$2,950

Step 2. Multiply Step 1 by .33 (which is the decimal form of 33%) for a PITI (principal, interest, taxes, and insurance) guideline.

Step 3. Subtract “Other Debt” payments from the result of Step 2 to determine the Affordable Monthly Mortgage Payment.

Step 4. Divide the result of Step 3 by 6.00 (this is the mortgage payment factor from Exhibit 7-7 based on a 30-year loan at 6%) and then multiply this by $1,000.

This is the Affordable Mortgage Amount.

Note: Does this amount seem reasonable for this scenario? If not, double-check your calculations.

Step 5. Divide the affordable mortgage amount by .85 (This is 1 minus the down payment percentage) to determine the Affordable Home Purchase.

Note: Does this amount seem reasonable for this scenario? If not, double-check your calculations.

Explanation / Answer

2950 973.5 813.5 Affordable Monthly Mortgage Payment 135583.3 Affordable Mortgage Amount 159509.8 Affordable Home Purchase Price

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