I. Given for the case:

Housing payment to income (HTI) <36%

Total Debt to income (DTI) < 43%

Loans available:

Conventional requires 20% down payment,

i.30 year fixed rate mortgage= 4.00%; credit score > 680

ii.10/1, rate is fixed for 10 years, then can adjust once per year thereafter, rate=3.625%, loan amortizes on a 30 schedule; credit score >720

Government requires 3.5% down payment, minimum credit score 620

i.FHA 30 year fixed rate mortgage =3.875%; Mortgage insurance Premium= 0.055% of the loan amount and paid monthly

ii.FHA 15 year fixed rate mortgage =3.125%

Real Estate appreciation in the local area is averaging 7.5% growth year over year

Real Estate property tax rate in the local area is 1.25% of the purchase price paid annually

Couple buying their first home:

Jane and John Doe are considering buying their first home. First they have to compare renting versus buying. Apartments near their work places go for $1,900 for a two bedroom, 2.0 baths. There is no rent control for the area. Condominiums with similar square footage and number of bedrooms and bath rooms are selling for $300,000 with home owner association dues of $372 per month, which includes property insurance.

Given:

Income and debt:

Combined yearly income $90,000

Credit card debt= $300/month

Student loans= $920/month on $110,000 @ 8.00%

Credit scores and savings:

Equifax score = 740, 715, respectively

Transunion = 690, 710, respectively

Experian= 680, 685, respectively

Savings =$75,000

Question:

How much house can the Does afford? Use the chart below

Home Affordibility Analysis

1. Amount of annual income	$
2. Monthly income (item 1 divided by 12)	$
3. Lender's affordibility ratio (decimal form)
4. Maximum monthly mortgage payment (PITI) (Item 2x item 3)
5. Estimated monthly property tax and homeowner's insurance payment	$
6. Maximum monthly loan payment (item 4- item 5)	$
7. Approximate average interest rate on loan
8. Planned loan maturity (years)
9. Mortgage payment payment per $10,000 (using item 7 and Item 8)
10. Maximum loan based on monthly income ($10,000 x item 6 divided by item 9	$
11. Funds available for making a down payment and paying closing costs	$
12. Funds availave for making a down payment (item 11 x . 67)
13. Maximum purchase price based on available monthly income (item 10+item 12)	$
14. Minimum acceptable down payment (in decimal form)
15. Maximum purchase price based on down payment (item 12 divded by item 14)	$
16. Maximum home purchase price ( lower of item 13 and item 15)	$