Chapter 9, Problem 3FPC

Summary Introduction

Case summary:

C and K started thinking to buy a home instead of renting any more due to increase in monthly rent amount. The monthly mortgage payments would be little higher than the amount they are paying for their rent. They have a student loan that might be a barrier to obtaining a mortgage. B found several mortgages that requires 3 to 5 percent down payment. They could be in financial difficulties if the price of the housing gets declined. They must also consider the closing cost and the real estate commission. C and K are thinking whether to use an online mortgage or offline and whether to choose fixed rate or adjustable rate mortgage.

Characters in the case: C and K.

Adequate information: The cost of rent is increasing due to which decision of buying a home has been made.
The family has a student loan which could be a barrier in obtaining a mortgage.
The mortgage requires 3 to 5 percent of down payment.
The family may take online or offline mortgage.
The family might take mortgage at fixed or adjustable rate.

To determine:

The actions that would be recommended for B before they move forward with buying a home.