Question

Tom is a college student whose income goes towards paying shockingly-high tuition at College Degree University. Tom has $500 per month to spend on housing and would like to purchase a home on a 30-year loan to build equity. He finds a mortgage rate of 4.1% APR. Which of the following home listing prices most closely matches his affordable monthly payment?

Answer 1

Calculation of home price most closely matches his monthly payment	#
P = Principal Loan = ?
R = Rate or APR = 4.1% =	4.1%
N = Number of payments = 30 x 12 =	360
PMT = 500 =	500
Formula for calculating payment which can alternatively used for calculating price of home
PMT = P x (R/12) x (1+R/12)^N / ((1+R/12)^N-1)
500 = (P x (4.1%/12)*(1+4.1%/12)^360/((1+4.1%/12)^360 -1) =
P = (500*((1+4.1%/12)^360-1))/((4.1%/12)*(1+4.1%/12)^360) =	$103,477.17