Purchasing a Car and Home Personal Finance 203 Due: 2022-10-11 Description This week we will be buying a car and and looking at the fundamentals of buying a home. Many of you put the acquirement of a car in the near future as one of your goals in previews assignments. This is a good chance to see how much it is going to cost to acquire that car. Buying or Renting a home is also something we will all eventually experience. In this assignment we will be looking at possible home options and work out part of the buying process. Part I - Buying a Car A. Go online and shop for a car that you want, use your website of choice. Below are some options to look at: carsforsale.com autotrader.com craigslist.org B. Take the given price of your car and pretend you are financing at the national average of 4.25%. Use a car loan monthly payment calculator to calculate your payment and record it below. What is the total cost of your loan? hint: multiply loan payments by the loan period. C. The interest given above is a national average. Vehicle interest rates vary based on several factors. Name three factors that affect that auto financing rates we receive? D. If you chose a new car name three benefits of buying a new car, name three drawbacks. If you chose a used car do the same for that. E. If buying a new car Name three things that the dealer warranties do not cover? If buying a used one name three things to evaluate the integrity of the car before buying? F. When we look at a vehicle like an asset, it is commonly a highly depreciating one. Why does a car depreciate? Use this website to calculate the 5 year depreciating value of your car. Input the age of the vehicle then years you will own the car (5). How much is your car predicted to depreciate on average after 5 years? Note: use the link provided since it is what Ill be using to check the answers you give me. Part II - Buying a Home 1 A. First we need to get an idea of how much house we can afford. Use this Zillow calculator to see what type of loan you can afford using your current or desired income as well as your potential monthly debt (good time to look at our budgeting assignment to get some realistic figures). List the loan amount you qualify for. B. Now that you have a loan estimate you can use Zillow or another website to look at your preferred location for a home. List the price of your home, location, and year built. C. Lets say you want to put 20% down. After you put 20% down what will you need to borrow? Note: if house I want to buy is $200,000 I would put $40,000 (20%) down and then need to borrow $160,000. If one does not put at least 20% down one typically gets a higher interest rate on loan and theyll have to pay PMI. What is PMI? D. We want a healthy debt to income ratio before we purchase a home. What is debt to income ratio? Using either your previous assignment - or simply make up an ideal income for yourself with a comfortable amount of debt - solve the equation below to find your DTI ratio. What does it mean if it is high, what does it mean if it is low? DT I = Monthly Debt P ayments Monthly Gross Income 100 E. Use this Zillow calculator to solve for your monthly payment NOT including PMI or HOA dues? Include your Debt-to-Income ratio, an interest rate of 3.188%, a 30 year (360 month) loan term, property taxes, and home insurance. F. Now lets talk about your property. What are three factors that could potentially affect your homes value? Extra Credit (15 points) Use these equations to solve for your auto and mortgage payments. Show your work for full credit. For examples, see the Auto Loan custom slide deck. P = A r(1 + r) n (1 + r) n] 1 P = Loan payment A = Amount of loan r = interest rate divided by number of periods (usually r/12) n = payments per year multiplied by number of years (n*t) More on calculating auto payments P = L r(1 + r) n (1 + r) n 1 P = Monthly mortgage payment L = Amortized loan amount r = interest rate divided by number of periods (usually r/12) n = payments per year multiplied by number of years (n*t) More on calculating mortgage payments 2