1. Using Your Personal Financial Plan Sheet 22, compare the advantages and the disadvantages of renting a home or apartment versus the purchase of a home.

2. Jamie Lee and Ross are estimating that they will be putting $40,000 from their savings as a down payment on their home purchase. Using the traditional financial guideline suggestion of €œtwo and a half times your salary plus your down payment€, calculate approximately how much Jamie Lee and Ross can spend on a house. 

3. Using Your Personal Financial Plan Sheet 24, calculate the affordable mortgage amount that would be suggested by a lending institution and based on Jamie Lee and Ross€™ income. How does this amount compare with the traditional financial guideline found in Question #2?

4. Jamie Lee and Ross found a brand new three-bedroom, 2 ½ bath home in a quiet neighborhood for sale. The listing price is $275,000. They would like to place a bid of $260,000 on the home. The seller€™s counteroffer was $273,000. What should Jamie Lee and Ross do next to demonstrate to the owner that they are serious buyers?

5. Jamie Lee and Ross received a signed contract from the buyer accepting their $273,000 offer! The seller also agreed to pay two points toward Jamie Lee and Ross€™ mortgage.  Calculate the benefit of having points paid toward the mortgage if Jamie Lee and Ross are putting a $40,000 down payment on the home.

6. Calculate Jamie Lee and Ross€™ mortgage payment, using the 5 percent rate for 30 years on the mortgage balance of $233,000.

The Housing Decision: Factors and Finances

Five years have passed and Jamie Lee, 34, is considering taking the plunge€”she is not only engaged to be married but is also debating whether to purchase a new home.

Jamie Lee's cupcake café is a success! It has been open for over a year and has earned rave reviews in the local press and from its customers, who just cannot get enough of her delicious cupcakes. One such customer, who stopped by on a whim in the café's first week of business, is Ross. After a whirlwind courtship, Ross, a self-employed web page designer, proposed, and Jamie Lee agreed to be his wife.

The bungalow that Jamie Lee has been renting for the past five years is too small for the soon-to-be newlyweds, so Jamie Lee and Ross are trying to decide if they should move to another rental or purchase a home of their own. They agreed to visit their local banker to get an idea of how much home they can afford with their combined incomes.

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Current FInanclal Situatlon Assets (Jamic Lec and Ross combincd): Checking account: $4,300 Savings account: $55,200 Emergency fund savings account: $19,100 IRA balance: $24,000 Cars: $12,000 (Jamie Lee) and $20,000 (Ross) Income: Jamie Lee: $45,000 gross income ($31,500 net income after taxes) Ross: $70,000 gross income ($59,000 net income after taxes) Monthly Expenses (Jamic Lec and Ross combined): Utilities: $160 Food: $325 Gas/maintenance: $275 Credit card payment: $0 Car loan payment: $289 Liabilities (Jamie Lee and Ross combined): Student loan balance: $0 Credit card balance: $0 Car loans: $8,000 Entertainment: $300