You are currently renting an apartment and want to purchase a home, but you are unsure of the price you can afford. You know you can afford your monthly rent of $2,500 and you have been tucking away an additional 20% of that amount towards a down payment on a new house. So, you figure you can add that into what you can afford to pay in a mortgage payment. Now you just have to figure out how much of a home that will get you. To keep your payments as low as possible you are only looking at 30-year mortgages and the current market interest rate is 5.15%. You also know that you will need to put at least 20% down. I What is the maximum loan amount you can afford and what is the maximum price you can afford to pay on a home?

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
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You are currently renting an apartment and want to purchase a home, but you are unsure of the price you
can afford. You know you can afford your monthly rent of $2,500 and you have been tucking away an
additional 20% of that amount towards a down payment on a new house.
So, you figure you can add that into what you can afford to pay in a mortgage payment. Now you just have
to figure out how much of a home that will get you.
To keep your payments as low as possible you are only looking at 30-year mortgages and the current
market interest rate is 5.15%. You also know that you will need to put at least 20% down.
I
What is the maximum loan amount you can afford and what is the maximum price you can afford to pay on
a home?
Transcribed Image Text:You are currently renting an apartment and want to purchase a home, but you are unsure of the price you can afford. You know you can afford your monthly rent of $2,500 and you have been tucking away an additional 20% of that amount towards a down payment on a new house. So, you figure you can add that into what you can afford to pay in a mortgage payment. Now you just have to figure out how much of a home that will get you. To keep your payments as low as possible you are only looking at 30-year mortgages and the current market interest rate is 5.15%. You also know that you will need to put at least 20% down. I What is the maximum loan amount you can afford and what is the maximum price you can afford to pay on a home?
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