A couple wants to purchase a $260,000 house, and they have the required 20% down payment and money for other closing costs. The bank is offering a 30-year mortgage at 4.625% interest, compounded monthly. The couple has an annual after-tax income of $55,000 and other debts totaling $650 per month. (a) If the maximum debt-to-income ratio (total monthly debt divided by after-tax monthly income) is 43%, can the couple afford to purchase the home? (b) If the couple lives in the house for 30 years, what is the total amount paid for the house, including down payment, principal, and interest?
A couple wants to purchase a $260,000 house, and they have the required 20% down payment and money for other closing costs. The bank is offering a 30-year mortgage at 4.625% interest, compounded monthly. The couple has an annual after-tax income of $55,000 and other debts totaling $650 per month. (a) If the maximum debt-to-income ratio (total monthly debt divided by after-tax monthly income) is 43%, can the couple afford to purchase the home? (b) If the couple lives in the house for 30 years, what is the total amount paid for the house, including down payment, principal, and interest?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 15P
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A couple wants to purchase a $260,000 house, and they have the required 20% down payment and money for other closing costs. The bank is offering a 30-year mortgage at 4.625% interest, compounded monthly. The couple has an annual after-tax income of $55,000 and other debts totaling $650 per month. (a) If the maximum debt-to-income ratio (total monthly debt divided by after-tax monthly income) is 43%, can the couple afford to purchase the home? (b) If the couple lives in the house for 30 years, what is the total amount paid for the house, including down payment, principal, and interest?
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