Chapter 5 Financial Planning Exercise 9 Home affordability analysis

Use Worksheet 5.3. Selma and Rodney Jackson need to calculate the amount 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 Jacksons estimate that homeowner's insurance and property taxes will be $300 per month. They expect the mortgage lender to use a 28 percent (of monthly gross income) mortgage payment affordability 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 the Jacksons can afford. Round your answer to the nearest cent, if necessary.

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