Another big problem, please help.

Note: For this project assume that you are married and have a combined family income of $61,691 (the median Iowan family household income in 2019,

Assignment

**Reminder, you are going to use the family income stated above for your calculations.

You are going to buy a vehicle. It is a good rule that your vehicle should cost no more than 20% the yearly family gross income (10% for an individual). Here is a good article that talks about this rule.

What is 20% of the family income stated above?

Go to the website and select a car of your choice that meets the financial limitation from (a). State the year, make, and model of the car and screen capture and paste the results from the website below. Be sure that the price is included within the screen capture.

Use the website to calculate the loan payments if you expect to pay 10% down on your car and get a four-year loan at a rate of 6% for the remaining amount. You will have to scroll down on the page to see the summary of your loan. Screen capture and paste the summary results below. PLEASE crop your image to show only the summary. To learn how to do this watch the video in Blackboard on screen capturing.

Show your work and compute the amount you will pay for the vehicle. Take your monthly payment from (c) times 12. This gives you how much you pay in 1 year. Then take that amount times 4 and this will give you the amount you will pay back for the loan over the 4 years. Add this amount to your down payment. This is the total you are paying for the vehicle. Show the work and answer below. Does the total you pay make sense (essentially, does the amount you pay cover the original cost of the vehicle and the interest you will end up paying? If not, go back to part c and compute the loan again.)

You should also consider the cost of maintenance. Yes, you saved money by buying a used car with the 20% rule but you are more likely to have maintenance costs. It is often advised to budget monthly 10% of your monthly car payment to cover maintenance costs. What is 10% of your monthly payment amount in part (c)?

You also need to pay car insurance. According to the website the average car insurance rate in Iowa in 2022 was approximately $1,260/year. State what this is monthly. You will need this value later.

You are going to buy a house. It is a good rule that your house should cost no more than 2 to 3 times the yearly gross family income.

What is 2 to 3 times the family gross income stated above?

Go to any real estate website of your choice (Iowa Realty, Century 21, Remax, Coldwell Banker, etc.) and find a house you like in the Des Moines Metro that meets your financial limitation from part (a). State the details of the house (number of bedrooms, year built, square feet, levels, property tax, etc.) and screen capture and paste the results from the website below, including the price within the screen capture. Again, please crop the pasted image to only include the necessary details.

Use the website to calculate the true monthly mortgage payment. The calculator is on the left hand side and click the advanced button to expand the calculator and input the following values (make sure the include Taxes/Ins, and Include PMI are checked).

Item	Amount
Home Price	Use the price you found in part (b)
Down Payment	$10,000
Program	30 year fixed
Interest Rate	4.5%
Property Tax	This should have been given on the realtor website. If it says Gross and Net, use Gross Taxes.
Homeowners Insurance	$1040/yr

Home Insurance: The homeowners insurance amount of $1040/yr I gave you was a rough estimate. Insurance rates can vary dramatically based on the age of a home, the type of updates, and the amount of the deductibles you choose. So while the number I gave should be a good estimate, do understand the there is some flexibility in this amount. Private Mortgage Insurance: Unless your house only cost $50,000, your down payment of $10,000 was less than 20%. By law you are deemed risky and are required to pay for home mortgage insurance (this is different than home insurance). This is a payment that gets tacked on top of the monthly payment from part (c). On the Zillow calculator, this is the value given as Private Mortgage Insurance.

Screen capture and paste the summary results below. Be sure to include the inputs, the breakdown and the payment schedule graph in your screen capture. To make things fit well in this document, you may want to paste multiple screen shots.

Look at your payment breakdown on the Zillow calculator. How much more than Principal and Interest (P&I) are you paying each month? State that amount below. Note that this amount is often forgotten about when potential homebuyers try to budget and estimate their purchasing power.

To lessen risks by making sure you are meeting your obligations banks require that your insurance and property tax get lumped into your home loan (mortgage) and that you pay the bank that total amount, and then they pay the insurance and taxes for you. They don't want to leave it up to you, because if you don't pay the taxes, the state can take your house, making it hard for the lender to get paid back. This is why all these amounts are lumped together on the Zillow calculator. Further, the day you sign the paperwork to buy your home is called the closing day. On this day you need to pay what is called closing costs. This covers the cost of the lender to process the paperwork, the attorney fees, a home inspection, and much more. This cost varies from lender to lender and can be from 2-5% of the purchase price of the home. Lets just keep things simple and say your closing costs were $3000.

Another surprise is that since the bank pays your taxes and insurance for you, as mentioned above, they do this with what they call an escrow account. To ensure that the bank has money to do so immediately they often require that you pay 2 months (or more) of taxes and home insurance. This is separate from closing cost. What would 2 months worth of taxes and home insurance be for your scenario? State this amount below.

OK, weve covered the big purchases and all their glory. Lets recap what we ended up with.

Lets suppose you bought the house and the car you found within a five year period. To do this you needed enough cash on hand for your immediate costs. These costs are the amounts in 1(c) (the 10%), the $10,000 from part 2(c), the closing cost of $3000, and the escrow cost in 2(e). Add these amounts up. This is the total cash you would have to have available in that five-year span just to be able to make these two purchases. State this amount below.

Lets break this down into a monthly budget. I have a rather bare-bones budget sheet below. Fill in the indicated amounts, to help you it says which question the amount should come from.

Monthly Budget Calculations
Net Monthly Income (Approximate after tax income.)	$4,500.00
Car Payment		1(c)
Car Maintenance Savings		1(e)
Car Insurance		1(f)
Mortgage (including taxes, ins, PMI)		2(c)
Amount Left (Take $4,500 and subtract the above amounts)

A way to think of this amount left is that after paying your taxes, car, and home obligations, this is what is left to pay off all your other bills (utilities, groceries, student loans, cell bill, cable, grooming, entertainment, dining, gifts, etc).

Your debt-to-income ratio can be a valuable numbersome say as important as your credit score. It's exactly what it sounds like: the amount of debt you have as compared to your overall income. Lenders look at this ratio when they are trying to decide whether to lend you money and in determining the interest rate on loansthey also consider your credit score. A low DTI shows you have a good balance between debt and income. As you might guess, lenders like this number to be lowgenerally you'll want to keep it below 36%, but the lower it is, the greater the chance you will be able to get the loans or credit you seek. For your scenario, add your mortgage from part 2(c), your car payment 1(c) and insurance 1(e). Also, lets assume you pay $200 a month for student loans. Add these amounts and divide it by $4561.33 (1/12 your family gross income. Fill in the amounts in the equation below and state your DTI. [Note, the ratio you get is slightly misleading because this only assumes you have these three debts, which most people also have other debts.] (?+?+?+200)4561.33=0.???=??.?%

At the end reflecting on the amount left in 3(b) and your DTI from 4, think upon the two purchasing rules (20% for cars and 2 to 3 times for homes), and give a reflection about what you learned in this project.