Develop a spreadsheet model to determine how much a person or a couple can afford to spend on a house. Lender guidelines suggest that the allowable monthly housing expenditure should be no more than 28% of monthly gross income. From this, you must subtract total nonmortgage housing expenses, which would include insurance and property taxes and any other additional expenses. This defines the affordable monthly mortgage payment. In addition, guidelines also suggest that total affordable monthly debt payments, including housing expenses, should not exceed 36% of gross monthly income. This is calculated by subtracting total nonmortgage housing expenses and any other installment debt, such as car loans, student loans, credit card debt, and so on, from 36% of total monthly gross income. The smaller of the affordable monthly mortgage payment and the total affordable monthly debt payments is the affordable monthly mortgage. To calculate the maximum that can be borrowed, find the monthly payment per $1,000 mortgage based on the current interest rate and duration of the loan. Divide the affordable monthly mortgage amount by this monthly payment to find the affordable mortgage. Assuming a 10% down payment, the maximum price of a house would be the affordable mortgage divided by 0.9. Use the following data to test your model:
Develop a spreadsheet model to determine how much a person or a couple can afford to spend on a house. Lender guidelines suggest that the allowable monthly housing expenditure should be no more than 28% of monthly gross income. From this, you must subtract total nonmortgage housing expenses, which would include insurance and property taxes and any other additional expenses. This defines the affordable monthly mortgage payment. In addition, guidelines also suggest that total affordable monthly debt payments, including housing expenses, should not exceed 36% of gross monthly income. This is calculated by subtracting total nonmortgage housing expenses and any other installment debt, such as car loans, student loans, credit card debt, and so on, from 36% of total monthly gross income. The smaller of the affordable monthly mortgage payment and the total affordable monthly debt payments is the affordable monthly mortgage. To calculate the maximum that can be borrowed, find the monthly payment per $1,000 mortgage based on the current interest rate and duration of the loan. Divide the affordable monthly mortgage amount by this monthly payment to find the affordable mortgage. Assuming a 10% down payment, the maximum price of a house would be the affordable mortgage divided by 0.9. Use the following data to test your model:
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter5: Business And Economic Forecasting
Section: Chapter Questions
Problem 1E: The forecasting staff for the Prizer Corporation has developed a model to predict sales of its...
Related questions
Question
Sub : Economics
Pls answer very fast.I ll upvote correct answer. Thank You
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning