FINA 2770 - Project Part 2 Fall 2023

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School

University of North Texas *

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Course

2770

Subject

Finance

Date

Jan 9, 2024

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Family Financial Plan Project – Part 2 – Buying a Car and a House You have just been hired as a Level 1 Financial Coach at UNT Financial Services. Now your first clients, Latoya and Sam Kroger, have asked for your assistance putting together a simple family financial plan. They are both 27 years old and Latoya is pregnant with their first child. They plan to have at least 2 more children over the next 5 years for a total of 3 children. They want to make sure they are taking the right steps financially. You will assist them and make recommendations to help them improve their situation in a video presentation. Latoya and Sam have the financial goals of buying a house and buying another car. They want your help and recommendations. Remember you will enter your numbers into Canvas to check them and you will deliver your recommendations for all parts in your video presentation at the end of the semester . Purchasing a Car: Latoya wants to buy a new car, so they do not have to share the truck. Latoya has narrowed her choice to a new BMW 230i from BMW of Plano. She wants your recommendations on buying new or used. In your presentation you need to present options available in DFW between new and used models no older than 2019 and fewer than 40,000 miles. Latoya and Sam have the following options for buying new: 2024 BMW 230i Sport Final price (including taxes and fees): $54,231 BMW Financing Options Term in Months 48 60 72 Down Payment 10% 10% 10% Interest Rate 2.99% 3.99% 6.49% Monthly Payment 1080.11 898.65 820.22 Total Interest Paid 3,037.59 5,111.19 10,248.30 Total Cost 57,268.59 59,342.19 64,479.30 Or she can take a $4,000 Cash Allowance and use the Credit Union Texas Federal Credit Union Financing Options Term in Months 48 60 72 Cash Allowance $4,000 $4,000 $4,000 Down Payment 5%* 5%* 5%* Interest Rate 6.04% 6.54% 7.14% Monthly Payment $1,121.57 $934.58 $816.78 Total Interest Paid $6,115.81 $8,355.36 $11,088.78 Total Cost $56,346.81 $58,586.36 $61,319.78 * after Cash Allowance Auto Questions: Which option is the least costly? Most costly? If they pay off the F150, how much could they swing in car payments? Which option would you recommend based on your answer? What options does Latoya have in the used car market? Should Latoya finance at Texas Fed or at the Dealership with BMW Financing? What other costs might change with a new vehicle?

Purchasing a House (questions on next page): Latoya and Sam are ready to purchase their first home in Lewisville. They contracted with a seller where the final price on the home is $335,000. Calculate the following and make your recommendations: New Home purchases: $335,000 (final cost) New Home Financing - Conventional 7% down Term in Years 15 30 Down Payment 7% 7% APR (including fees) 6.125% 7.25% Monthly Payment (without PMI) 2,650.97 2,125.32 Monthly Payment (with PMI) 2,845.69 2,320.04 Total Interest Paid 165,624.15 453,565.27 Monthly PMI (0.75% paid for 1/3 of the loan) 194.72 194.72 Total PMI Paid 11,683.13 23,366.25 Total Interest and PMI paid 177,307.28 476,931.52 Total Payments 488,857.28 788,481.52 Total Cost 512,307.28 811,931.52 New Home Financing - Conventional 20% down Term in Years 15 30 Down Payment 20% 20% APR (including fees) 5.825% 7.125% Monthly Payment (without PMI) 2,236.28 1,805.57 Monthly Payment (with PMI) 2,403.78 1,973.07 Total Interest Paid 134,529.77 382,003.63 Monthly PMI 167.50 167.50 Total PMI Paid 10,050.00 20,100.00 Total Interest and PMI paid 144,579.77 402,103.63 Total Payments 412,579.77 670,103.63 Total Cost 479,579.77 737,103.63 New Home Financing - FHA 3.5% down Term in Years 15 30 Down Payment 3.5% 3.5% APR (including fees) 6.625% 7.5% Monthly Payment (without MIP) 2,838.33 2,260.39 Monthly Payment (with MIP) 3,107.73 2,529.78 Total Interest Paid 187,625.18 490,463.85 Monthly MIP (1% paid for all of the loan) 269.40 269.40 Total MIP Paid 48,491.25 96,982.50 Total Interest and MIP paid 236,116.43 587,446.35 Total Payments 559,391.43 910,721.35 Total Cost 571,116.43 922,446.35 Questions on next page!!

House Questions: Given their house savings balance and their current house savings rate assuming 2% interest rate compounded monthly, how many months (round up) will it take the Kroger’s to save for the 20% down payment? Which loan costs the most? Which is the least costly? Which loan has the lowest payment? Which do you recommend? Is there anything else they might want to save cash for that goes along with buying a new house?

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