Five years have passed and Jamie Lee, 34, is considering taking the plunge: Not only is she engaged to be married, but she is also deciding on whether to purchase a new home.

Jamie Lee's cupcake caf is a success! It has been open over a year now and has earned itself rave reviews in the local press and from its regular customers, who just cannot get enough of her delicious cupcakes. One such customer, who stopped by on a whim in the caf's first week of business, is Ross. After a whirlwind courtship, Ross, a self-employed web page designer, proposed and Jamie Lee agreed to be his wife.

The bungalow that Jamie Lee has been renting for the past five years is too small for the soon-to-be newlyweds, so Jamie Lee and Ross are trying to decide if they should move to another rental or purchase a home of their own. They agreed to visit their local banker to get an idea of how much home they can afford with their combined incomes.

Current Financial Situation

Assets (Jamie Lee and Ross combined):

Checking account, $4,300

Savings account, $55,200

Emergency fund savings account, $19,100

IRA balance, $24,000

Cars, $12,000 (Jamie Lee) and $20,000 (Ross)

Liabilities (Jamie Lee and Ross combined):

Student loan balance, $0

Credit card balance, $0

Car loans, $8,000

Income:

Jamie Lee, $45,000 gross income ($31,500 net income after taxes)

Ross, $70,000 gross income ($59,000 net income after taxes)

Monthly Expenses (Jamie Lee and Ross combined):

Utilities, $160

Food, $325

Gas/Maintenance, $275

Credit card payment, $0

Car loan payment, $289

Entertainment, $300

2.	Jamie Lee and Ross are estimating that they will be putting $40,000 from their savings account toward a down payment on their home purchase. Using the traditional financial guideline suggestion of two and a half times your salary plus your down payment, calculate approximately how much Jamie Lee and Ross can spend on a house.
3.	Using Your Personal Financial Plan sheet 24, calculate the affordable mortgage amount that would be suggested by a lending institution based on Jamie Lee and Ross's income. How does this amount compare with the traditional financial guideline found in Question 2? Use the following amounts for Jamie Lee and Ross's calculations: 10 percent down payment 28 percent for TIPI $500.00 per month for estimated combined property taxes and insurance 5 percent interest rate for 30 years (see Exhibit 77)
4.	Jamie Lee and Ross found a brand-new three-bedroom, 2-bath home for sale in a quiet neighborhood. The listing price is $275,000. They placed a bid of $260,000 on the home. The seller's counteroffer was $273,000. What should Jamie Lee and Ross do next to demonstrate to the owner that they are serious buyers?
5.	Jamie Lee and Ross received a signed contract from the seller accepting their $273,000 offer! The seller also agreed to pay two points toward Jamie Lee and Ross's mortgage. Calculate the benefit of having points paid toward the mortgage if Jamie Lee and Ross are putting a $40,000 down payment on the home.
6.	Calculate Jamie Lee and Ross's mortgage payment, using the 5 percent rate for 30 years on the mortgage balance of $233,000.