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Can I afford this home? - Part 1 Can Alyssa and Tim afford this home using the monthly income loan criterion? Next week, your friends
Can I afford this home? Part
Can Alyssa and Tim afford this home using the monthly income loan criterion?
Next week, your friends Alyssa and Tim want to apply to the Fifth State Bank for a mortgage loan. They are considering the purchase of a home that is expected to cost $ 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, Alyssa and Tim also collected the following information:
Their financial records report a combined gross beforetax annual income of $ and current premortgage installment loan, credit card, and car loan debt of $ per month.
Their property taxes and homeowner's insurance policy are expected to cost $ per year.
Their best estimate of the interest rate on their mortgage is and they are interested in obtaining a year loan.
They have accumulated savings of $ that can be used to satisfy the home's down payment and closing costs.
The lender requires a minimum down payment, and an affordability ratio that ranges from a minimum of to a maximum of
Use either your financial calculator or the maximum affordable mortgage loan formula to complete the following home affordability worksheet. Note: When completing the form, round each dollar amount to the nearest whole dollar. Unless labeled differently, all of the following values represent dollar amounts. Also, some values calculated or used in the upper section of the table may also be used in the lower section.
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