Question

Michelle Duncan wants to know what price home she can afford. Her annual gross income is...

Michelle Duncan wants to know what price home she can afford. Her annual gross income is $43,200. She owes $670 per month on other debts and expects her property taxes and homeowners insurance to cost $240 per month. She knows she can get an 6.00%, 30-year mortgage so her mortgage payment factor is 6.00. She expects to make a 20% down payment. What is Michelle's affordable home purchase price?

Homework Answers

Answer #1

Answer : 95417

Calculation :

First calculate monthly gross income (annual income / 12).

$43,200/12 = $3600

With a down payment of at least 3.5 percent, lenders use 38 percent of monthly gross income as a guideline for PITI plus other debt payments.

3600 * 0.38 = $1,368

Deduct other debt payments and monthly costs of property taxes and homeowner’s insurance.

$1,368 - 670 - 240 = $458

Divide this amount by the monthly mortgage payment per $1,000 based on current mortgage rates

($458/6.00) x $1,000 = $76,333

Divide affordable mortgage amount by 1 less portion of the down payment

$76333/(1 - 0.2) = $95417

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Michelle Duncan wants to know her affordable home purchase price. Her annual gross income is $45,600....
Michelle Duncan wants to know her affordable home purchase price. Her annual gross income is $45,600. She has $780 per month of other debt and expects her property taxes and homeowners insurance to cost $310 per month. She knows she can get a 11.00%, 30-year mortgage so that her mortgage payment factor is $9.52. She expects to make a 10% down payment. What is Michelle's affordable home purchase price? (Round your answer to the nearest dollar amount.)
Duane Miller wants to know what price home he can afford. His annual gross income is...
Duane Miller wants to know what price home he can afford. His annual gross income is $49,200. He has no other debt expenses and expects property taxes and insurance to cost $320 per month. He knows he can get a 8.50%, 15 year mortgage so his mortgage payment factor is 9.85. He expects to make a 15% down payment. What is Duane's affordable home purchase price?
A homeowner is looking to buy a home in Marvin Gardens. The most he can afford...
A homeowner is looking to buy a home in Marvin Gardens. The most he can afford to pay in total is $1,800 per month. Yearly property taxes will be about $3,000 (escrowed monthly) and insurance is $110 per month. There are no other costs. If mortgage rates are 6.25% for a 30-year fixed-rate mortgage, how large can his mortgage be? If his parents give him $20,000 for a down payment, what is the most he can pay on a house...
A homeowner is looking to buy a home in Marvin Gardens. The most he can afford...
A homeowner is looking to buy a home in Marvin Gardens. The most he can afford to pay in total is $1,800 per month. Yearly property taxes will be about $3,000 (escrowed monthly) and insurance is $110 per month. There are no other costs. If his parents give him $20,000 for a down payment, what is the most he can pay for a house with a 15-year mortgage if the interest rate is 5.50 percent?
Kim Lee is trying to decide whether she can afford a loan she needs in order...
Kim Lee is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now Kim is living at home and works in a shoe store, earning a gross income of $1,050 per month. Her employer deducts $147 for taxes from her monthly pay. Kim also pays $181 on several credit card debts each month. The loan she needs for chiropractic school will cost an additional $170 per month. Help Kim make...
Emma Jones is planning to move this coming summer to Oxford, MS to start her new...
Emma Jones is planning to move this coming summer to Oxford, MS to start her new job at a technology firm. She has not yet decided whether she wants to rent or buy a property in Oxford and she is asking your team to help her make this financial decision. Her monthly housing budget is $1,800.  This budget must cover housing expenses including rent or owner’s costs (example: mortgage, hazard insurance, property taxes, and Home Owner Association fees, if any). A...
1)You want to buy a house and wonder what you can afford. Banks look at collateral,...
1)You want to buy a house and wonder what you can afford. Banks look at collateral, creditworthiness and capacity (ability to pay) when making loans. Assume you have sufficient down payment and credit score. Your bank has a requirement of 28% housing expense ratio and your gross annual income is $69,000. Based on those assumptions, how much can you afford to pay in total housing costs each month? 2) You are looking to purchase a new home that is listed...
CASE STUDY – Jacobson Carpet Company In January 2002, Ms. Mary Lewis was preparing to meet...
CASE STUDY – Jacobson Carpet Company In January 2002, Ms. Mary Lewis was preparing to meet with Mr. Carpenter, President of Jacobson Carpet Company. Ms. Lewis assumed that the meeting was related to the recent Board of directors of the company. As a direct assistant to the President, she knew from experience that this type of meeting often resulted in a project to be studied. Her expectation was confirmed as soon as Mr. Carpenter began to inform her of the...