MATH $101$ Project $2$: Planning for a Mortgage

Name:

Introduction

In this project, you will be researching and planning for the purchase of a home. You will need to determine

the monthly cost of the home, as well as whether you can afford it$.$

Scenario

Use the family scenario developed in the last project. List the following information from that scenario:

Location:

Occupation:

Number of children $($under $18)$ and their ages:

Gross Yearly Income: $

Gross Monthly Income: $

$1$ The House

Use any real estate listing website to locate a house in the area you$$ve chosen to live in$.$ This house will

need to have enough bedrooms to fit the family that you described in the first project. Make sure that you

pick one that is reasonably priced, because if at the end of the project, you cannot afford it$,$ you$$ll need to

repeat the process with a less expensive home.

List the price of the home that you picked below, and attach a printout of the house listing as an

appendix.

$

$1$

$2$ The Mortgage

Find a mortgage advertised online, and record the interest rate here. You$$ll also need to attach a printout

of this advertised mortgage as an appendix to the report.

$\%$

Fill out the information below, assuming that you put down $10\%$ of the purchase price.

Purchase Price: $

Down Payment: $

Loan Principal: $

In reality, banks offer different interest rates for $15-$year and $30-$year mortgages, but for simplicity you

can assume that this interest rate is valid for both terms. Calculate the monthly payment $($P&I$)$ for both

options, and calculate the total amount you$$ll pay over the life of each loan. Record these answers in the

table below.

$15-$Year Mortgage $30-$Year Mortgage

Monthly Payment:

Total Amount Paid:

Circle the column in the table above that contains the mortgage that you pick. Remember, you need

to make sure that you can afford this monthly payment $($see below$).$

$2$

$3$ Total Monthly Housing Costs

In addition to the mortgage payments, there are other costs associated with owning a home, including

$$ Property taxes

$$ Condo$/$HOA fees

$$ Home insurance

Property Taxes If there is no property tax information shown on the house listing, multiply the house

purchase price by $2\%$ to obtain an estimate for the annual property taxes, then divide that by $12$ to

estimate the monthly cost of property taxes.

Annual Property Taxes: $

Monthly Property Taxes: $

Condo$/$HOA Fees If a condo$/$HOA monthly fee is shown in the house listing, include that amount

here. If not, write $$N$/$A$.$

$

Home Insurance As an estimate for how much you can expect to spend on home insurance, divide the

value of the house by $1000$ and multiply by $3\mathrm{.}5.$ This answer represents the annual insurance premium.

Find the monthly premium by dividing this answer by $12.$ List the monthly insurance premium here.

$

$3$

$4$ Can You Afford It$?$

Budget A common guideline is that you should spend no more than $28\%$ of your gross income on housing.

Thus, multiply your household$$s gross monthly income by $28\%$ to find your monthly housing allowance.

MONTHLY HOUSING BUDGET: $

Cost Add up all the monthly costs found above to determine if you can afford this home.

Monthly Mortgage Payment: $

Monthly Property Taxes: $

Monthly Condo$/$HOA Fee: $

Monthly Insurance Premium: $

TOTAL MONTHLY HOUSING COST: $

Compare this total monthly housing cost to the monthly housing budget found above. Can you afford

this house? If not, go back and repeat this process with a less expensive house.

Appendix

As an appendix to this report, attach the house listing and the mortgage advertisement showing the interest

rate.

$4$

Grading Rubric

Criteria Possible Points Your Points

Section $1$: The House

Home price listed $5$

Home listing attached in appendix $5$

Section $2$: The Mortgage

Mortgage interest rate $6$

Mortgage advertisement attached in appendix $6$

Down payment $6$

Loan principal $6$

$15-$year mortgage monthly payment $6$

$15-$year mortgage total cost $6$

$30-$year mortgage monthly payment $6$

$30-$year mortgage total cost $6$

Section $3$: Total Monthly Housing Costs

Annual property taxes $6$

Monthly property taxes $6$

Condo$/$HOA fees $($if applicable$)6$

Monthly home insurance premium $6$

Section $4$: Can You Afford It$?$

Monthly housing budget $5$

Total monthly housing cost $8$

Verify that you can afford the house $5$

Appendix:

Points will be taken off if appendix is not included.

No late papers will be accepted.

Total: $/100$

$5$