Next week, your friends Valerie and Shen want to apply to the Tenth National Bank for a mortgage loan. They are considering the purchase of a home that is expected to cost $155,000. Given your knowledge of personal finance, they've asked for your help in completing the Home Affordability Worksheet that follows. To assist in the preparation of the worksheet, Valerie and Shen also collected the following information: • Their financial records report a combined gross before-tax annual income of $85,000 and current (premortgage) installment loan, credit card, and car loan debt of $1,240 per month. • Their property taxes and homeowner's insurance policy are expected to cost $3,488 per year. • Their best estimate of the interest rate on their mortgage is 7.5%, and they are interested in obtaining a 15-year loan. • They have accumulated savings of $38,500 that can be used to satisfy the home's down payment and closing costs. • The lender requires a minimum 20% down payment, and an affordability ratio that ranges from a minimum of 25% to a maximum of
Next week, your friends Valerie and Shen want to apply to the Tenth National Bank for a mortgage loan. They are considering the purchase of a home that is expected to cost $155,000. Given your knowledge of personal finance, they've asked for your help in completing the Home Affordability Worksheet that follows. To assist in the preparation of the worksheet, Valerie and Shen also collected the following information: • Their financial records report a combined gross before-tax annual income of $85,000 and current (premortgage) installment loan, credit card, and car loan debt of $1,240 per month. • Their property taxes and homeowner's insurance policy are expected to cost $3,488 per year. • Their best estimate of the interest rate on their mortgage is 7.5%, and they are interested in obtaining a 15-year loan. • They have accumulated savings of $38,500 that can be used to satisfy the home's down payment and closing costs. • The lender requires a minimum 20% down payment, and an affordability ratio that ranges from a minimum of 25% to a maximum of
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:11. Can I afford this home? - Part 1
Can Valerie and Shen afford this home using the monthly income loan criterion?
Next week, your friends Valerie and Shen want to apply to the Tenth National Bank for a mortgage loan. They are considering the purchase of a home
that is expected to cost $155,000. Given your knowledge of personal finance, they've asked for your help in completing the Home Affordability
Worksheet that follows.
To assist in the preparation of the worksheet, Valerie and Shen also collected the following information:
• Their financial records report a combined gross before-tax annual income of $85,000 and current (premortgage) installment loan,
credit card, and car loan debt of $1,240 per month.
• Their property taxes and homeowner's insurance policy are expected to cost $3,488 per year.
• Their best estimate of the interest rate on their mortgage is 7.5%, and they are interested in obtaining a 15-year loan.
They have accumulated savings of $38,500 that can be used to satisfy the home's down payment and closing costs.
• The lender requires a minimum 20% down payment, and an affordability ratio that ranges from a minimum of 25% to a maximum of
30%.
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