Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the affordable home purchase price for the following situation. (Refer to Exhibit 9-8 and Exhibit 9-9) (Round time value factor to 2 decimal places, intermediate and final answers to the nearest whole number.) Percent Monthly gross income Down payment to be made (percent of purchase price) Other debt (monthly payment) Monthly estimate for property taxes and insurance 30-year loan $6,000 10 $ 310 $ 390 5.0 Percent Affordable monthly mortgage payment Affordable mortgage amount Affordable home purchase Exhibit 9-9 Mortgage payment factors (principal and interest factors per $1,000 of loan amount) Term Rate 30 Years 25 Years 20 Years 15 Years 3.0% $4.22 $4.74 $5.55 $6.91 3.5 4.49 5.01 5.80 7.15 4.0 4.77 5.28 6.06 7.40 4.5 5.07 5.56 6.33 7.65 5.0 5.37 5.85 6.60 7.91 5.5 5.68 6.14 6.88 8.17 6.0 6.00 6.44 7.16 8.43 6.5 6.32 6.67 7.45 8.71 70 6.65 7.06 7.75 8.98 7.5 6.99 7.39 8.06 9.27 8.0 7.34 7.72 8.36 9.56 8.5 7.69 8.05 8.68 9.85 Exhibit 9-8 Housing affordability and mortgage qualification amounts Example A Example B $48,000 = 12 $48,000 - 12 Step 1: Determine your monthly gross income (annual income divided by 12). $ 4,000 $ 4,000 *.38 *.33 Step 2: With a down payment of at least 5 percent, lenders use 33 percent of monthly gross income as a guideline for PITI (principal, interest, taxes, and insurance) and 38 percent of monthly gross income as a guideline for PITI plus other debt payments. $ 1,520 $ 1,320 -380 Step 3: Subtract other debt payments (e.g., payments on an auto loan) and an estimate of the monthly costs of property taxes and homeowner's insurance. -300 -300 $ 840 $1,020 $ 7.34 -$ 7.34 * $ 1,000 x $ 1,000 (a) Affordable monthly mortgage payment Step 4: Divide this amount by the monthly mortgage payment per $1,000 based on current mortgage rates-an 8 percent, 30-year loan, for example (see Exhibit 9-90)-and multiply by $1,000. (b) Affordable mortgage amount Step 5: Divide your affordable mortgage amount by 1 minus the fractional portion of your down payment (e.g., 1 1 with a 10 percent down payment). $114,441 $138,965 5.9 5.9 (c) Affordable home purchase price $127,157 $154,405 Note: The two ratios lending institutions use (step 2) and other loan requirements may vary based on a variety of factors, including the type of mortgage, the amount of the down payment, your income level, and current interest rates. For example, with a down payment of 10 percent or more and a credit score exceeding 720, the ratios might increase to 40/45 or 45/50 percent in the above exhibit
