Question

Jack earns 2500 in income per month. Jack has 500 in debt payments during the month and he estimates that his tax and homeowner’s insurance is 100 dollars per month. He plans on putting 10 percent down and will be able to get a 30 year mortgage at 8 percent. What is the maximum affordable home purchase price he can afford?

Answer 1

Total Income left with Jack per month= 2500-500-100 = 1900

If he plans to take a loan for 30 years at 8% he can pay the maximum payment of 1900:

We will use a BA 2 plus financial calculator to find the amount of the loan he can afford:

PMT: 1900

N: 30*12 = 360

I/Y: 8%/12 = 0.6667%

CMPT PV

Amount of the loan = 258,938.63

Please note that this is the 90% of the total amount of loan

So the can maximum affordable home purchase price he can afford:

258,938.63/90% =287,709.588