Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the affordable home purchase price for the following situation. Use Exhibit 7-6, Exhibit 7-7

Monthly gross income Other debt (monthly payment) 25-year loan at Down payment to be made (percent of purchase price) Monthly estimate for property taxes and insurance $ 3,300 $ 195 5 percent 10 percent $ 245 Affordable monthly mortgage payment Affordable mortgage amount Affordable home purchase Exhibit 7-6 Housing Affordability and Mortgage Qualification Amount Example A Example B Step 1: Determine your monthly gross income (annual income divided by 12). $48,000 = 12 $48,000 = 12 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. $ 4,000 x 0.38 $ 1.520 $ 4,000 x 0.33 $ 1.320 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. -380 -300 -300 (a) Affordable monthly mortgage paymente $ 840 $ 1,020 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 7-7) and multiply by $1,000. - $ 7.34 X $ 1.000 +$ 7.34 X $ 1.000 (b) Affordable mortgage amount.... $114.441 $138,965 Step 5: Divide your affordable mortgage amount by 1 minus the fractional portion of your down payment (e.g., 1 -0.1 with a 10 percent down payment). +0.9 +0.9 (c) Affordable home purchase price....................... $127.157 $154,405 Exhibit 7-7 Term Rate 3.0% Mortgage Payment Factors (principal and interest factors per $1,000 of loan amount) 30 Years $4.22 4.49 3.5 20 Years $5.55 5.80 6.06 6.33 4.77 25 Years $4.74 5.01 5.28 5.56 5.85 6.14 4.0 4.5 15 Years $6.91 7.15 7.40 7.65 7.91 8.17 5.07 5.37 5.68 6.60 6.88 6.00 6.44 7.16 8.44 6.32 6.75 7.46 8.71 7.0 7.5 6.65 6.99 7.34 7.07 7.39 7.72 7.75 8.06 8.36 8.99 9.27 9.56 8.0