Use Worksheet 5.3. Jennie and Caleb McDonald need to calculate the amount that they can afford to spend on their first home. They have a combined annual income of $47,500 and have $27,000 available for a down payment and closing costs. The McDonalds estimate that homeowner’s insurance and property taxes will be $250 per month. They expect the mortgage lender to use a 30 percent (of monthly gross income) mortgage payment afford-ability ratio, to lend at an interest rate of 6 percent on a 30-year mortgage, and to require a 15 percent down payment. Based on this information, use the home affordability analysis form in Worksheet 5.3 to determine the highest-priced home that the McDonalds can afford.
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