Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the affordable home purchase price for the following situation. (Refer to Exhibit 9-8 and Exhibit 9-9) (Round time value factor to 2 decimal places, intermediate and final answers to the nearest whole number.) Mortgage Costs 2$ Monthly gross income Down payment to be made (percent of purchase price) Other debt (monthly payment) Monthly estimate for property taxes and insurance 30-year loan 4,250 20 Percent 220 280 7.0 Percent Affordable Amount Affordable monthly mortgage payment Affordable mortgage amount Affordable home purchase price
Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the affordable home purchase price for the following situation. (Refer to Exhibit 9-8 and Exhibit 9-9) (Round time value factor to 2 decimal places, intermediate and final answers to the nearest whole number.) Mortgage Costs 2$ Monthly gross income Down payment to be made (percent of purchase price) Other debt (monthly payment) Monthly estimate for property taxes and insurance 30-year loan 4,250 20 Percent 220 280 7.0 Percent Affordable Amount Affordable monthly mortgage payment Affordable mortgage amount Affordable home purchase price
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Exhibit 9-8 Housing affordability and mortgage qualification amounts
Example A
Example B
Step 1:
Determine your monthly
$48,000 - 12 $48,000 - 12
gross income (annual
income divided by 12).
Step 2: With a down payment of at
$4,000
$4,000
least 5 percent, lenders use
x 38
x 33
33 percent of monthly gross
$1,520
$1,320
income as a guideline for
PITI (principal, interest, taxes,
and insurance) and 38
percent of monthly gross
income as a guideline for
Term Rate
30 Yoars
25 Yoars
20 Yoars
15 Years
PITI plus other debt
payments.
3.0%
$4.22
$4.74
$5.55
$6.91
Step 3: Subtract other debt
-380
3.5
4.49
5.01
5.80
7.15
payments (e.g., payments
-300
-300
an auto loan) and an
4.0
4.77
5.28
6.06
7.40
estimate of the monthly
4.5
5.07
5.56
6.33
7.65
costs of property taxes and
homeowner's insurance.
5.0
5.37
5.85
6.60
7.91
(a) Affordable monthly mortgage
$ 840
$1,020
5.5
5.68
6.14
6.88
8.17
payment
6.0
6.00
6.44
7.16
8.43
Step 4: Divide this amount by the
-$7.34
-$7.34
monthly mortgage payment
x $1,000
x $1,000
6.5
6.32
6.67
7.45
8.71
per $1,000 based on current
7.0
6.65
7.06
775
8.98
mortgage rates-an 8
percent, 30-year loan, for
example (see Exhibit 9-9E)
-and multiply by $1,000.
7.5
6.99
7.39
8.06
9.27
8.0
7.34
7.72
8.36
9.56
(b) Affordable mortgage amount
$114,441
$138.965
8.5
7.69
8.05
8.68
9.85
Step 5: Divide your affordable
+.9
mortgage amount by 1 minus
the fractional portion of your
down payment (e.g., 1-1
with a 10 percent down
payment).
(c) Affordable home purchase price
$127,157
$154,405
Note: The two ratios lending institutions use (atep 2) and other loen requirements may vary besed on
a variety of factors, including the type of mortgage, the amount of the down payment, your income
level, and current interest retes For example, with a down payment of 10 percent or more and a
credit score exceeding 720, the retios might incresse to 40/45 or 45/50 percent in the above
Transcribed Image Text:Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the affordable home purchase price for the
following situation. (Refer to Exhibit 9-8 and Exhibit 9-9) (Round time value factor to 2 decimal places, intermediate and final
answers to the nearest whole number.)
Mortgage
Costs
Monthly gross income
Down payment to be made (percent of purchase price)
Other debt (monthly payment)
2$
4,250
20
Percent
$
220
Monthly estimate for property taxes and insurance
30-year loan
280
7.0
Percent
Affordable
Amount
Affordable monthly mortgage payment
Affordable mortgage amount
Affordable home purchase price
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