PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337117005
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Question
Chapter 5, Problem 5FPE
Summary Introduction
To calculate: The monthly amount that should be afford by the family R when their monthly payment is $3,500. Also, identify is there any variations if they were already making monthly installment loan payment that totals to $750 on two car loans.
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using the maximum ratios for a conventional mortgage, how big a monthly payment could one afford if theor gross income is $4,000? Would it make a difference if he already had a car payment of $750?
Using the maximum ratios for a conventional mortgage, how big a monthly payment could the Sanchez family afford if their gross (before-tax) monthly income amounted to $5,000? (Hint: Monthly mortgage payments cannot exceed 25 to 30 percent of the borrower's monthly gross income and the borrower's total monthly installment loan payments (including the mortgage payment) cannot exceed 33 percent to 38 percent of monthly gross income.)
$
Would it make any difference if they were already making monthly installment loan payments totaling $600 on two car loans?
Maximum mortgage payment they could make would be $ .
Problem: Justin and Hayley are interested in a
fixed-rate mortgage for $450,000. They are
undecided whether to choose a 15- or 30-year
mortgage. The current mortgage rate is 3.5% for
the 15-year mortgage, and 3.85% for the 30-year
mortgage.
(a) What are the monthly principal and interest
payments for EACH loan? Show your work.
(b) What is the total amount of interest paid on
EACH loan? Show your work.
(c) Overall, how much more interest is paid by
choosing the 30-year mortgage? Show your
work.
Chapter 5 Solutions
PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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- Give me answerarrow_forwardYou are applying for a conventional mortgage from the Americana Bank. Your monthly gross income is $3,500, and the bank uses the 28% housing expense ratio guideline. a. What is the highest PITI you can qualify for? Hint: Solve the housing expense ratio formula for PITI. (Remember, this is an application of the percentage formula, Portion = Rate x Base, where PITI is the portion, the expense ratio is the rate, and your monthly gross income is the base.) b. Based on your answer from part a, if you are applying for a 30-year, 9% mortgage, and the taxes and insurance portion of PITI is $175 per month, use Table 14-1 to calculate what size mortgage you qualify for. Hint: Subtract TI from PITI. Divide the PI by the appropriate table factor to determine how many $1,000s you qualify to borrow. c. Based on your answer from part b, if you are planning on a 20% down payment, what is the most expensive house you can afford? Hint: Use the percentage formula again. The purchase price of the house is…arrow_forwardSuppose you want to purchase a house. Your take-home pay is $4270 per month, and you wish to stay within the recommended guidelines for mortgage amounts by only spending 1/4 of your take-home pay on a house payment. You have $18,500 saved for a down payment and you can get an APR from your bank of 5.7%, compounded monthly. What is the total cost of a house you could afford with a 3030-year mortgage? Round your answer to the nearest cent, if necessary.arrow_forward
- Please need answerarrow_forwardBarbara and Jerry can afford a mortgage payment of $1, 500 per month. If interest rates are 3.25% for 30 years, how much can they afford to borrow?Group of answer choices a: $540,000.00 b: $566.53 c: S344, 664.11 d: S912, 558.71arrow_forwardYour parents shop around and a different bank is willing to lend them a $750,000 30-year mortgage with payments of $4,865 per month. What is the implied APR of this loan?arrow_forward
- 4. The McDaniel family is purchasing a home, and have two fixed-rate loan offers to consider for their mortgage. The home costs $156,000 and they have a 20 % down payment. They must choose between a 30-year mortgage at 5% or a 25-year mortgage at 5.5%. Calculate the monthly payment and total interest for each loan. Which is the better deal? Explain your choicearrow_forwardHw.81.arrow_forwardProblem: Justin and Hayley are interested in a fixed-rate mortgage for $450,000. They are undecided whether to choose a 15- or 30-year mortgage. The current mortgage rate is 3.5% for the 15-year mortgage, and 3.85% for the 30-year mortgage. (a) What are the monthly principal and interest payments for EACH loan? (b) What is the total amount of interest paid on EACH loan? (c) Overall, how much more interest is paid by choosing the 30-year mortgage? Sarrow_forward
- Answer the following question using a spreadsheet and the material in the appendix. You would like to buy a house. Assume that given your income, you can afford to pay $12,000 a year to a lender for the next 30 years. If the interest rate is 7% how much can you borrow today based on your ability to pay? What about if the interest rate is 3%? Maximum mortgage at 7%: $ Maximum mortgage at 3%: $arrow_forwardSuppose 20-year home mortgages are currently available at a rate of 5.5 percent per year. Jason and Jolene can afford mortgage payments of at most $850 per month. If they take out the largest loan possible, how much interest will they pay over the period of the loan? (answer in whole number)arrow_forward3. A loan used for buying a home is called a mortgage. The Fortunato family is borrowing $430,000 to buy a home. They are taking out a 30-year mortgage at a rate of 3.55%. What is the monthly payment? 3. b. What is the total amount paid?arrow_forward
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