The Tremblays have been preapproved by their bank to enter the housing market with a mortgage interest rate of 8.6%. They have $30,000 set aside for a down payment. They have also calculated that they can afford a monthly payment of $1,350. They have narrowed their search to three houses and are hoping that financial constraints will narrow their choices. The three houses will cost the following amounts: $150,000, $270,000, and $400,000. The bank will add $50 to each mortgage payment if they put less than 20% down and an additional fee of $50 more to each payment if they put less than 10% down. a. Which of these houses can they afford with a 30-year mortgage? b. Which of these houses can they afford with a 15-year mortgage? c. Which house do you think they should buy?
The Tremblays have been preapproved by their bank to enter the housing market with a mortgage interest rate of 8.6%. They have $30,000 set aside for a down payment. They have also calculated that they can afford a monthly payment of $1,350. They have narrowed their search to three houses and are hoping that financial constraints will narrow their choices. The three houses will cost the following amounts: $150,000, $270,000, and $400,000. The bank will add $50 to each mortgage payment if they put less than 20% down and an additional fee of $50 more to each payment if they put less than 10% down.
a. Which of these houses can they afford with a 30-year mortgage?
b. Which of these houses can they afford with a 15-year mortgage?
c. Which house do you think they should buy?
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