12. Can I afford this home? Part 2 Can Crystal and Brian afford this home using...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
12. Can I afford this home? Part 2 Can Crystal and Brian afford this home using the installment debt loan criterion? Next week, your friends Crystal and Brian 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 $185,000. Given your knowledge of personal finance, they've asked for your help in completing the Home Affordability Worksheet that follows. To assist in the preparation of the worksheet, Crystal and Brian also collected the following information: • Their financial records report a combined gross before-tax annual income of $125,000 and current (pre-mortgage) 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 $3,238 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. • They have accumulated savings of $44,500 that can be used to satisfy the home's down payment and closing costs. • The lender requires a minimum 20% down payment, and installment loan affordability ratios that range from a minimum of 33% to a maximum of 38%. Use either the table of monthly payments (necessary to repay a $10,000 loan), your financial calculator, or the maximum affordable mortgage loan formula to complete the following home affordability worksheet. (Note: When completing the form, round each dollar amount to the nearest whole dollar. Unless labeled differently, all of the following values represent dollar amounts. Also, some values calculated or used in the upper section of the table may also be used in the lower section. Round your percentage answer to two decimal places.) 7 Monthly Payments Factors Maximum Affordable Mortgage Loan Formula Loan Maturity Interest Rate (%) 15 Years 20 Years 25 Years 10 Years 106.0655 30 Years 53.6822 5.0 79.0794 65.9956 58.4590 5.5 108.5263 81.7083 68.7887 61.4087 56.7789 6.0 111.0205 84.3857 71.6431 64.4301 59.9551 6.5 113.5480 87.1107 74.5573 67.5207 63.2068 77.5299 70.6779 66.5302 7.0 7.5 8.0 116.1085 89.8828 118.7018 92.7012 80.5593 73.8991 69.9215 121.3276 95.5652 83.6440 77.1816 73.3765 8.5 123.9857 98.4740 86.7823 80.5227 76.8913 9.0 126.6758 101.4267 89.9726 83.9196 80.4623 9.5 129.3976 104.4225 93.2131 87.3697 84.0854 10.0 132.1507 107.4605 96.5022 90.8701 87.7572 Home Affordability Worksheet Based on Installment Payments and Monthly Income 1. Annual income 2. Monthly income 3. Existing monthly installment payments 4. Existing monthly installment payments as percentage of monthly income (%) 5. Lender's monthly installment loan affordability ratio 6. Maximum amount of total affordable installment debt 7. Maximum monthly mortgage payment (PITI) affordable based on installment loan ratio 8. Estimated monthly property tax and insurance payment 9. Maximum monthly loan payment (P and I only) 10. Expected interest rate 11. Planned loan maturity (years) 12. Mortgage payment factor per $10,000 (from the Loan Maturity table) 13. Maximum loan based on mortgage payment factor (from the Loan Maturity table) 14. Required (20%) down payment 15. Maximum home price based on installment loan ratio High Value 38% 00 Low Value 33% Amount 7.5% 15 % Given these results, which statement regarding Crystal and Brian's mortgage qualification process and the purchase of their $185,000 target home is true? Crystal and Brian qualify to purchase their $185,000 target home according to the Installment Debt Affordability Worksheet criterion. Crystal and Brian do not qualify to purchase their $185,000 target home according to the Installment Debt Affordability Worksheet criterion. 12. Can I afford this home? Part 2 Can Crystal and Brian afford this home using the installment debt loan criterion? Next week, your friends Crystal and Brian 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 $185,000. Given your knowledge of personal finance, they've asked for your help in completing the Home Affordability Worksheet that follows. To assist in the preparation of the worksheet, Crystal and Brian also collected the following information: • Their financial records report a combined gross before-tax annual income of $125,000 and current (pre-mortgage) 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 $3,238 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. • They have accumulated savings of $44,500 that can be used to satisfy the home's down payment and closing costs. • The lender requires a minimum 20% down payment, and installment loan affordability ratios that range from a minimum of 33% to a maximum of 38%. Use either the table of monthly payments (necessary to repay a $10,000 loan), your financial calculator, or the maximum affordable mortgage loan formula to complete the following home affordability worksheet. (Note: When completing the form, round each dollar amount to the nearest whole dollar. Unless labeled differently, all of the following values represent dollar amounts. Also, some values calculated or used in the upper section of the table may also be used in the lower section. Round your percentage answer to two decimal places.) 7 Monthly Payments Factors Maximum Affordable Mortgage Loan Formula Loan Maturity Interest Rate (%) 15 Years 20 Years 25 Years 10 Years 106.0655 30 Years 53.6822 5.0 79.0794 65.9956 58.4590 5.5 108.5263 81.7083 68.7887 61.4087 56.7789 6.0 111.0205 84.3857 71.6431 64.4301 59.9551 6.5 113.5480 87.1107 74.5573 67.5207 63.2068 77.5299 70.6779 66.5302 7.0 7.5 8.0 116.1085 89.8828 118.7018 92.7012 80.5593 73.8991 69.9215 121.3276 95.5652 83.6440 77.1816 73.3765 8.5 123.9857 98.4740 86.7823 80.5227 76.8913 9.0 126.6758 101.4267 89.9726 83.9196 80.4623 9.5 129.3976 104.4225 93.2131 87.3697 84.0854 10.0 132.1507 107.4605 96.5022 90.8701 87.7572 Home Affordability Worksheet Based on Installment Payments and Monthly Income 1. Annual income 2. Monthly income 3. Existing monthly installment payments 4. Existing monthly installment payments as percentage of monthly income (%) 5. Lender's monthly installment loan affordability ratio 6. Maximum amount of total affordable installment debt 7. Maximum monthly mortgage payment (PITI) affordable based on installment loan ratio 8. Estimated monthly property tax and insurance payment 9. Maximum monthly loan payment (P and I only) 10. Expected interest rate 11. Planned loan maturity (years) 12. Mortgage payment factor per $10,000 (from the Loan Maturity table) 13. Maximum loan based on mortgage payment factor (from the Loan Maturity table) 14. Required (20%) down payment 15. Maximum home price based on installment loan ratio High Value 38% 00 Low Value 33% Amount 7.5% 15 % Given these results, which statement regarding Crystal and Brian's mortgage qualification process and the purchase of their $185,000 target home is true? Crystal and Brian qualify to purchase their $185,000 target home according to the Installment Debt Affordability Worksheet criterion. Crystal and Brian do not qualify to purchase their $185,000 target home according to the Installment Debt Affordability Worksheet criterion.
Expert Answer:
Answer rating: 100% (QA)
A 1 Annual Income 125000 BA12 2 Monthly income 10417 C 3 Existing monthly instalment payment 1823 DC... View the full answer
Related Book For
Accounting
ISBN: 978-0324188004
21st Edition
Authors: Carl s. warren, James m. reeve, Philip e. fess
Posted Date:
Students also viewed these mathematics questions
-
Without referring to the preprogrammed function on your financial calculator or to tables, use the basic formula for future value along with the given interest rate, i, and the number of periods, n,...
-
Without referring to the preprogrammed function on your financial calculator or to tables, use the basic formula for present value, along with the given opportunity cost, i, and the number of...
-
Monthly payments were originally calculated to repay a $20,000 loan at 9% compounded monthly over a 10-year period. After one year, the debtor took advantage of an option in the loan contract to...
-
Will has a business loan of $100,000, it is for 7 years with an interest rate of 9%. How much interest would he pay over those 7 years?
-
A small computer chip manufacturer wants to forecast monthly operating costs as a function of the number of units produced during a month. The company has collected the 16 months of data in the file...
-
Record the following transactions that occurred during March 2019 for Harris Manufacturing Company, which uses the perpetual inventory system: Mar. 12 Transferred $5,000 of completed goods from the...
-
Make use of the data in Sample Problem 5-S to describe the integration that would take place when the following transaction is entered into the computer: Received2 Mini Washer 8c Dryers at $525.00...
-
An investor estimates that next years sales for Dursleys Hotels Inc. should amount to about $100 million. The company has 5.0 million shares outstanding, generates a net profit margin of about 10%,...
-
S Name the x coordinate of one solution to the system of equations 2
-
Suppose we form a portfolio invested in Mercedes and BMW stocks. The two stocks are equally weighted in the portfolio. The table below displays each stocks mean return, variance, and standard...
-
If you intend to work as a brand marketer, digital marketer, or marketing analyst, the future of third-party cookies is of significant interest to you. Take a stance on viable options: first-party...
-
On 1 August 2008 BUDGET CAR HIRE sold one of their vehicles for R159 600 cash. The vehicle was originally purchased for R228 000 on 1 May 2007. On 1 September 2008 a new vehicle was purchased on...
-
This involves the ability to address and analyze phenomena for its global interconnectedness. To recognize how ideas, events, and actions in one location have consequences elsewhere for humans and/or...
-
Put the following parts of a bad news letter in the correct order, as it would appear if written out. * 8 points 1st 2nd 3rd 4th 5th 6th 7th 8th Thank you for your order. We appreciate your interest...
-
Reju Ltd produces and sells bottles of non-alcoholic wine. Price and cost data are as follows: Sales price per bottle Variable costs per bottle: Direct material Direct labour Overhead Selling costs...
-
Situational leadership theory is based on the relationship between leaders and followers, and it states a leader must analyze each situation and apply the correct leadership style for the given...
-
The following information is for Noor Office Supplies: Accounts Payable 120,000, Salaries Wages Payable 20,000, Mortgage Payable 180,000, Inventory 140,000, The total amount of liabilities to be...
-
Wal-Mart is the second largest retailer in the world. The data file on the disk holds monthly data on Wal-Marts revenue, along with several possibly related economic variables. a) Using computer...
-
In the following summary of data for a payroll period, some amounts have been intentionally omitted: Earnings: 1. At regular rate ........... ? 2. At overtime rate ...........$ 44,200 3. Total...
-
The following data are accumulated by Environmental Services Inc. in evaluating two competing capital investment proposals: Determine the expected average rate of return for eachproposal. Testing...
-
Wild Rose Hospital began using standards to evaluate its Admissions Department. The standard was broken into two types of admissions as follows: Standard Time to Complete Type of Admission Admission...
-
The so-called Asian crisis began in Thailand in July 1997. Since then a number of other countries and regions have been affected. a. Explain how and why you think this crisis began. b. How and why...
-
Explain how forecasting performance can be evaluated.
-
Describe the common techniques used for forecasting,
Study smarter with the SolutionInn App