You have just finished your finance degree and struck it rich with a high paying, $75,000/year job in downtown Phoenix. Your parents have agreed to help you purchase a condo, townhome or house in the Phoenix metro area with a $10,000 down payment. Thanks 'rents! You would like at least one-bedroom, but with prices the way they are, you realize you may have to settle for a studio. You would also like to be as close to the CBD as possible. As a first-time buyer, lenders are requiring you to pay a higher interest rate than move-up buyers and are also requiring at least a 5% down payment.

310 S 4th St Unit 1507, Phoenix, AZ 85004

Price: $430,000

Monthly Payment: $3,343

INSTRUCTIONS

PART ONE - PURCHASE: Your task is to find a home within your price range that is appropriate given your demographic profile and income constraints, identify a suitable mortgage and prepare an amortization schedule for the property. Assume the buyer can afford a mortgage up to 3 times their current income. Compare mortgage options from three different lenders. Answer the following questions.

2. What is the first-year monthly payment (mortgage only) on the mortgage you chose? Why did you choose it over the other options?
4. Estimate the annual property tax liability for your new place. How much does it add to each payment? HINT: this information is available on the Maricopa County Assessor's website.
6. What portion of the first-year payment is allocated to principal and interest in the mortgage? How about year two?
8. What is the remaining balance of the loan after the first five years of payments?
10. Discuss any issues you had with affordability and finding a suitable home, and also answer the questions required above.
12. Prepare an amortization schedule showing the first five payments and the payment in months 71 and 72 including principal, interest, and unpaid mortgage balance using the table included in the mortgage module. A video modeling the construction of the schedule is included in the module.

Note: You may need to make some assumptions about the mortgage that are not indicated in the profiles. For instance, you will have to make future projections when making calculations for an adjustable-rate mortgage. Make sure to have a solid foundation for any estimates. Think about the broader economy and investigate expert opinions before settling on a revised rate. Remember, the future is hard to predict!