Question
The Johnson family wants to buy a house. They have saved $120,000 to put towards their down payment, and they do not have access to
The Johnson family wants to buy a house. They have saved $120,000 to put towards their down payment, and they do not have access to any other cash savings. Consider the following data points:
The Johnsons have a combined gross income of $10,000 per month.
Their post-tax salary is $7,000 per month.
Other debts for which they make monthly payments are as follows:
Student loan payments: USD 500 per month for next 30 years
Car loan payments: USD 300 per month for next 7 years
Their credit score is 730.
Property Tax & Insurance: 2% of the value of the house.
The Johnsons provided their financial history to a mortgage broker and were told they could borrow a maximum amount $417,000 at 4.25% for a 30-year fully amortizing mortgage assuming a 20% down payment. Given the following assumptions, is it viable for the Johnsons to purchase a house with an asking price of $500,000?
| Value of House ($) | |
| Down Payment (%) | 20% |
| Down Payment ($) | |
| Loan Amount | |
| Interest Rate (%) | |
| APR (%) | |
| PMT/Month ($) | |
| Taxes/Month ($) | |
| Total Payment ($) | |
| Other Expenses, If Any ($) | |
| Monthly Net Income ($) | |
| Loan Balance at EOY 5 | |
| Payment/Expenses as % of Monthly Income | |
| Total Interest Payments Over Life of Loan | |
| Other Items You Would Like to Add, If Any | |
| Final Outcome: Is This a Viable Choice? Why or Why Not? |
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