Part I

Assume that you have found a home for sale and have agreed to a purchase price of $$257900.$

Down Payment: Assume that you are going to make a $10\%$ down payment on the house. Determine the amount of your down payment and the balance to finance.

Down Payment $=$

Loan Amount $=$$

Monthly Payment: Calculate the monthly payment for a $30$ year loan $($rounding to the nearest cent, so rounding to two decimal places$).$ For the $30$ year loan use an annual interest rate of $4\mathrm{.}93\%.$

First, express the annual interest rate as a decimal.

The annual interest rate expressed as a decimal i

Now use the loan formula to find the monthly payment, $d.$ The loan formula solved for $d$ is:

$d=\frac{P_0(\frac{r}{k})}{(1-(1+\frac{r}{k}{)}^{-Nk})}$

$P_0$ is the original loan amount.

$r$ is the annual interest rate in decimal form.

$k$ is the number of compounding periods in one year $($so $k=12).$

$N$ is the length of the loan in years.

Monthly Payment : $d=$$

Assuming you make the monthly payment each month for $30$ years, what will be the total amount repaid?

Total payments $=$$

Find the total amount of interest paid on the loan over the $30$ years.

Total interest paid $=$$

Calculate your Income: As already mentioned, these payments are for principal and interest only. You will also have monthly payments for home insurance and property taxes, but we are not taking those into account here.

In addition, it is necessary to have income leftover for other expenses like electricity, water, food, and other bills. As a wise home owner, you decide that your monthly principal and interest payment should not exceed $35\%$ of your monthly take$-$home pay so that you have plenty left over for those other expenses. $($This is a general recommendation from most financial advisors.$)$

What minimum monthly take$-$home pay $($i$.$e$.$ your monthly pay checks after taxes$)$ should you earn in order to meet this goal? In other words, $35\%$ of what monthly takehome pay is equal to your mortgage payment?

Minimum monthly take$-$home pay $=$$

It is also important to note that your net or take$-$home pay $($after taxes$)$ is less than your gross pay $($before taxes$).$ Assuming that your net pay is $73\%$ of your gross pay, use your monthly take$-$home pay to find the minimum gross monthly salary will you need to afford this house.

Minimum monthly gross pay $=$$

Now find the minimum annual gross pay you will need to afford this house.

Minimum annual gross pay

Research: Do a search on the internet for the "average salary" of either your future profession or by your future college degree and compare it with your last answer. Make a note of it as you will need to comment on it in the Reflective Writing