each student will simulate finding and purchasing a home. The loan amount each student can "afford" will be based on a simulated annual income that will be calculated below. Having selected a home to purchase within the appropriate price range, each student will identify an amortization table in a spreadsheet program detailing the repayment of the home mortgage. Modifications will then be made to the amortization table to explore the effects of various repayment options.

The problems below guide the sequence of calculations needed to answer all of the required questions. The first several problems provide an approximate (simulated) price range that each student "can afford."

• 1. Personal Annual Income

For this project, each student will have an individual simulated annual income - annual gross income will

equal the student's current WeBWorK percentage multiplied by $68,000. WeBWorK percentage is 69.95.

Calculate and state your (simulated) annual income.

• 2. Monthly Payment

Several factors influence how much an individual can afford to pay each month toward a home loan.

a) Find and state your monthly income by dividing your annual income by 12.

It is recommended that your housing payment never exceed 33% of your gross monthly income.

b) Find and state 33% of your monthly income.

Home mortgage payments usually include several fees which are not directly related to repaying the actual home loan - mortgage insurance, homeowner's insurance, property taxes, etc.

c) To simulate the effect of these fees (which often are as high as 15% of the actual monthly payment required by the home loan), divide the value found in part b by 1.15. This is the maximum (simulated) amount you can afford to pay each month toward a home loan. State your maximum (simulated) loan amount.

• 3. Loan Amount

A typical home loan has a term of 30 years and a fixed APR. Using the monthly payment calculated in the previous problem, calculate and state the loan amount you can afford assuming an APR of 4.28% compounded monthly.

• 4. Down Payment

Suppose you have been saving money to purchase this home since your 14th birthday. Calculate and state the amount you would have saved if you have been investing $95 each month (since your 14th birthday) into a savings account with an APR of 2.4%. This amount can be used as a down payment on your house.

• 5. Purchase Price

Calculate and state your total maximum (simulated) purchase price by adding the loan amount and down payment calculated above.