Personal Finance (MindTap Course List)
13th Edition
ISBN: 9781337099752
Author: E. Thomas Garman, Raymond Forgue
Publisher: Cengage Learning
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Before you are able to purchase a home you need to get pre-qualified and determine the maximum amount you can afford for the mortgage payment. The mortgage company that you visit uses the qualifying ratios 29/41. After speaking with the mortgage broker and answering several questions, the broker compiles this information regarding your income and expenses:
You have a monthly income of $5,500.
Your significant other that is living with your and will be on the loan earns $4,500 monthly.
You have 2 car payments, one is $325 and the other is $280.
Your significant other has a motorcycle payment of $450.
You have a credit card payment of $25.
Your significant other has a credit card payment of $180.
The annual property tax in the area that you are considering to purchase the house has an average amount of $2800, while the average home insurance is $800 annually.
Determine the anticipated monthly payment of the mortgage based on the given ratios.
A) The Front-End (AKA: Housing) Ratio: ?
B)…
Information for mortgage of a house How would I figure out what my income would have to be to afford my monthly payment?
First-time homeowners often use FHA loans to finance their home. Go to fha-home-loans.com and find out the current requirements to qualify for an FHA loan. They may differ slightly from that described in the book because the underwriting requirements frequently change. Summarize the types of loans that are currently available. What is the highest loan-to-value ratio that you could obtain?
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- Please show how to solve this using excel and the table attached. You have the following two mortgage choices listed on the table: 1. Calculate APR for each mortgage choice.arrow_forwardCan Olivia and Anthony Afford This Home Using the Monthly Income Loan Criterion? Next week, your friends Olivia and Anthony want to apply to the Fourth Global Bank for a mortgage loan. They are considering the purchase of a home that is expected to cost $125,000. Given your knowledge of personal finance, they’ve asked for your help in completing the Home Affordability Worksheet that follows. (Note: When completing the form, round each dollar amount to the nearest whole dollar.) To assist in the preparation of the worksheet, Olivia and Anthony also collected the following information: • Their financial records report a combined gross before-tax annual income of $125,000 and current (premortgage) installment loan, credit card, and car loan debt of $1,823 per month. • Their property taxes and homeowner’s insurance policy are expected to cost $3,125 per year. • Their best estimate of the interest rate on their mortgage is 7.5%, and they are interested in obtaining a 15-year loan.…arrow_forwardLearn to make the right decision for your family. Realize that everyone in the transaction of you buying a house wants you to buy the biggest house you can afford. They make more money from the transaction when you buy more house than you can afford, but still qualify for. How much more interest will you pay on a 30 year mortgage versus a 15 year mortgage? Using the following values for average mortgage rates today, compare how much you will pay in interest over the life of the mortgage. 30 year mortgage. i = 2.98, n=30, $300,000 = mortgage value 15 year mortgage. i = 2.75, n=15, $300,000 = mortgage value If you run the numbers, you will come out with $457,987 for the 30 year mortgage over 30 years and only $341.691 for the 15 year mortgage. Subtract the $300,000 from both numbers for the principal and you will have the interest only.arrow_forward
- Suppose you need to borrow $200,000 to buy a home, and you are deciding between a 15 year mortgage and a 30 year mortgage. Research a bank offering 15 year and 30 year mortgage loans and find the interest rates on those loans. Use the techniques you learned in this Module to do the following: 1. Calculate the monthly payment for a 15-year mortgage and for a 30-year mortgage. 2. Find the total amount of interest you will pay on the 15 year mortgage and on the 30 year mortgage. 3. Describe some of the factors (financial and non-financial) that can influence whether to obtain a shorter term mortgage or a longer term mortgage. 4. Which mortgage would you take, the 15 year or the 30 year? Explain your decision.arrow_forwardI need help for D, E, and G please You are a loan officer at the West Elm Savings and Loan. Mr. and Mrs. Brady are in your office to apply for a mortgage loan on a house they want to buy. The house has a market value of $170,000. Your bank requires 1/5 of the market value as a down payment. (a) What is the amount (in $) of the down payment? $ (b) What is the amount (in $) of the mortgage for which the Bradys are applying? $ (c) Your bank offers the Bradys a 30 year mortgage with a rate of 5%. At that rate, the monthly payments for principal and interest on the loan will be $5.37 for every $1,000 financed. What is the amount (in $) of the principal and interest portion of the Bradys' monthly payment? $ (d) What is the total amount (in $) of interest that will be paid over the life of the loan? $ (e) Your bank also requires that the monthly mortgage payments include property tax and homeowners insurance payments. If the property tax is $1,710 per…arrow_forwardYou own a home that was recently appraised for $330,000. The balance on your existing mortgage is $119,350. If your bank is willing to loan up to 80% of the appraised value, what is the potential amount (in $) of credit available on a home equity loan? ______$arrow_forward
- If you were in early 2021with the once-in-a-generation low interest rate environment, and the rates would likely to increase in the next decade. If you graduated from college in the early 2021 and have a decent job, you have decided to purchase a relative expensive house to your income. Suppose that a bank offered you three types of mortgages: adjusted rate mortgage (ARM), fixed-rate mortgage with constant payments (FRM) and graduated payment mortgage (GPM). Which type of mortgage should you choose and why?arrow_forwardHow is a home mortgage an example of Time Value of Money? What would you expect the impact of varying terms (years needed to pay off the loan) and rates to be using TVM rules? Why do homeowners sometimes refinance their mortgages?arrow_forwardIn this part of the project, you will be purchasing the home you chose in the Budget Project. You will need to obtain a loan from a financial institution since you cannot pay cash for your home. You will be researching three different loan scenarios and determining which loan option best fits your situation and needs. Purchase price of the home you chose from the Budget Project: ________$431,873______ Part 1: Financing your home Loan Scenario 1: In this scenario, your financial institution is offering you a 30-year fixed mortgage with a 20% down payment at a 3.43% fixed rate. Determine the following: Calculate the down payment for this loan. How much will you need to finance from the bank for this loan? What is your monthly payment? Use technology or the monthly payment formula in your text to get the monthly payment for this loan. What is the total cost of the loan over 30 years? How much of this cost is interest? What is the total you will expect to pay at closing for this loan…arrow_forward
- Please Answer part a,b,c of this textbook question about the Application of Time Value of Money to Mortgages. Tiana graduated from college 5 years ago and has been working since then. Shewants to buy her first house costing $325,000 and has obtained a loan from a Bank. A minimumdown payment of 15% would be required and the bank will provide the difference. Her grandparenthave told her that they will cover her down payment. a. A Bank has quoted her mortgage interest rate is 4.5%; this rate would be compoundedsemi-annually, while her payments would be made monthly. What is the effective monthlyinterest rate (EMR) that she would pay? b. Calculate her monthly mortgage payment, assuming 15% down payment from hergrandparents and a mortgage maturity of 25 years. c. Given (b) above, how much of her payment in the 2nd month will go toward repayment ofprincipal and how much is interest payment?arrow_forwardIn the Excel Payment Function file that follows, you are looking to see what your basic mortgage payment will be if you buy a home for $250,000. It will be a 30-year mortgage. The interest your bank will charge will be 7.5%. In cell C5, create a function that determines what your monthly payment will be.arrow_forwardJoe bob wants to buy a car and will need to take out a loan in order to make the purchase. His current monthly income is 3,500 per month. His mortgage payment is 900 per month, and his student loan payment is 350 per month according to the affordability formulas given can he afford to take out another loan? when should he follow the affordability formulas? In what case should he not? how could taking out the car loan impact his other priorities? what is the affordability formula I need to use as wellarrow_forward
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