I need help with this housing affordability question... Five years have passed and Jamie Lee, 34, is considering taking the plunge--not only is she engaged to be married, but she is also deciding on whether to purchase a new home. Jamie Lee’s cupcake café is a success! It has been open for over a year now and has earned itself rave reviews in the local press and from its regular customers who just cannot get enough of her delicious varieties of cupcakes. One such customer, who stopped by on a whim in the café’s first week of business, is Ross. After a whirlwind courtship, Ross, a self-employed web designer, proposed, and Jamie Lee agreed to be his wife. The bungalow that Jamie Lee has been renting for the past five years is too small for the soon-to-be newlyweds, so Jamie Lee and Ross have purchased a brand new three-bedroom, 2 ½ bath home in a quiet neighborhood for $293,000. The provided information and the table below to calculate the affordable mortgage amount that would be suggested by a lending institution based on Jamie Lee and Ross’s income. We need to make note of the purchase price (above) of their home for future questions.The following for Jamie Lee and Ross's calculations:10% down payment$650 per month for estimated combined property taxes and insurance4% interest rate for 30 yearsRefer to (Exhibit 7-7) for current mortgage ratesI really need help with calculating the steps Current Financial SituationAssets (Jamie Lee andRoss combined):Checking accountSavings accountEmergency fund savingsaccountIRA balanceCar (Jamie Lee)Car (Ross)Liabilities (Combined):Student loan balanceCredit card balanceCar loans$6,300$57, 200Income:Gross income (JamieLee)Net income after taxes(Jamie Lee)Gross income (Ross)Net income after taxes(Ross)Monthly Expenses(Combined):Affordable mortgage amountStep 5$21,100$26,000$14,000$22,000 UtilitiesFood$0Gas/Maintenance$0 Credit card payment$10,000 Car loan paymentEntertainmentStep 1Determine your monthly gross income (annual gross income / 12)Step 2With a down payment of at least 5%, lenders use 33% of monthly grossincome as a guideline for PITI (principal, interest, taxes, and insurance)and 38% of monthly gross income as a guideline for PITI plus other debtpayments. Enter 33% or 38% depending upon whether other debtpayments are present.Step 3Subtract other debt payments (such as payments on an auto loan), ifapplicable.Subtract estimated monthly costs of property taxes and homeowner'sinsurance.Affordable monthly mortgage paymentStep 4Divide this amount by the monthly mortgage payment per $1,000 basedon the current mortgage rates (see Exhibit 7-7). For example, for a 10%,30-year loan, the number would be $8.78).Multiply by $1,000Divide your affordable mortgage amount by 1 minus the fractional portionof your down payment (for example, 0.9 for a 10 percent down payment).Affordable home purchase price$65,000$45,500$90,000$76,500X1X$145$320$230$0$309$400 Exhibit 7-7Mortgage PaymentFactors (principaland interest factorsper $1,000 of loanamount)Term Rate3.0%3.54.04.55.05.56.06.57.07.58.030 Years$4.224.494.775.075.375.686.006.326.656.997.3425 Years$4.745.015.285.565.856.146.446.757.077.397.7220 Years$5.555.806.066.336.606.887.167.467.758.068.3615 Years$6.917.157.407.657.918.178.448.718.999.279.56

The computations to this question will be done along the steps given in the table since everything…

I need help with this housing affordability question... Five years have passed and Jamie Lee, 34, is considering taking the plunge--not only is she engaged to be married, but she is also deciding on whether to purchase a new home. Jamie Lee’s cupcake café is a success! It has been open for over a year now and has earned itself rave reviews in the local press and from its regular customers who just cannot get enough of her delicious varieties of cupcakes. One such customer, who stopped by on a whim in the café’s first week of business, is Ross. After a whirlwind courtship, Ross, a self-employed web designer, proposed, and Jamie Lee agreed to be his wife. The bungalow that Jamie Lee has been renting for the past five years is too small for the soon-to-be newlyweds, so Jamie Lee and Ross have purchased a brand new three-bedroom, 2 ½ bath home in a quiet neighborhood for $293,000. The provided information and the table below to calculate the affordable mortgage amount that would be suggested by a lending institution based on Jamie Lee and Ross’s income. We need to make note of the purchase price (above) of their home for future questions. The following for Jamie Lee and Ross's calculations: 10% down payment $650 per month for estimated combined property taxes and insurance 4% interest rate for 30 years Refer to (Exhibit 7-7) for current mortgage rates I really need help with calculating the steps

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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I need help with this housing affordability question...

Five years have passed and Jamie Lee, 34, is considering taking the plunge--not only is she engaged to be married, but she is also deciding on whether to purchase a new home.

Jamie Lee’s cupcake café is a success! It has been open for over a year now and has earned itself rave reviews in the local press and from its regular customers who just cannot get enough of her delicious varieties of cupcakes. One such customer, who stopped by on a whim in the café’s first week of business, is Ross. After a whirlwind courtship, Ross, a self-employed web designer, proposed, and Jamie Lee agreed to be his wife.

The bungalow that Jamie Lee has been renting for the past five years is too small for the soon-to-be newlyweds, so Jamie Lee and Ross have purchased a brand new three-bedroom, 2 ½ bath home in a quiet neighborhood for $293,000.

The provided information and the table below to calculate the affordable mortgage amount that would be suggested by a lending institution based on Jamie Lee and Ross’s income. We need to make note of the purchase price (above) of their home for future questions.

The following for Jamie Lee and Ross's calculations:

10% down payment
$650 per month for estimated combined property taxes and insurance
4% interest rate for 30 years
Refer to (Exhibit 7-7) for current mortgage rates

I really need help with calculating the steps

Current Financial Situation
Assets (Jamie Lee and
Ross combined):
Checking account
Savings account
Emergency fund savings
account
IRA balance
Car (Jamie Lee)
Car (Ross)
Liabilities (Combined):
Student loan balance
Credit card balance
Car loans
$6,300
$57, 200
Income:
Gross income (Jamie
Lee)
Net income after taxes
(Jamie Lee)
Gross income (Ross)
Net income after taxes
(Ross)
Monthly Expenses
(Combined):
Affordable mortgage amount
Step 5
$21,100
$26,000
$14,000
$22,000 Utilities
Food
$0
Gas/Maintenance
$0 Credit card payment
$10,000 Car loan payment
Entertainment
Step 1
Determine your monthly gross income (annual gross income / 12)
Step 2
With a down payment of at least 5%, lenders use 33% of monthly gross
income as a guideline for PITI (principal, interest, taxes, and insurance)
and 38% of monthly gross income as a guideline for PITI plus other debt
payments. Enter 33% or 38% depending upon whether other debt
payments are present.
Step 3
Subtract other debt payments (such as payments on an auto loan), if
applicable.
Subtract estimated monthly costs of property taxes and homeowner's
insurance.
Affordable monthly mortgage payment
Step 4
Divide this amount by the monthly mortgage payment per $1,000 based
on the current mortgage rates (see Exhibit 7-7). For example, for a 10%,
30-year loan, the number would be $8.78).
Multiply by $1,000
Divide your affordable mortgage amount by 1 minus the fractional portion
of your down payment (for example, 0.9 for a 10 percent down payment).
Affordable home purchase price
$65,000
$45,500
$90,000
$76,500
X
1
X
$145
$320
$230
$0
$309
$400

Exhibit 7-7
Mortgage Payment
Factors (principal
and interest factors
per $1,000 of loan
amount)
Term Rate
3.0%
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
30 Years
$4.22
4.49
4.77
5.07
5.37
5.68
6.00
6.32
6.65
6.99
7.34
25 Years
$4.74
5.01
5.28
5.56
5.85
6.14
6.44
6.75
7.07
7.39
7.72
20 Years
$5.55
5.80
6.06
6.33
6.60
6.88
7.16
7.46
7.75
8.06
8.36
15 Years
$6.91
7.15
7.40
7.65
7.91
8.17
8.44
8.71
8.99
9.27
9.56

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