John and Emma Olson bought a two$-$bedroom, $2-$bathroom, townhome in Madison, Wisconsin five years ago for $$160,000.$ When they purchased the townhome, they had a $20\%$ down payment and were able to get a $30-$year loan at an interest rate of $4\%.$ They have since had a second child, and John has just secured a job in downtown St$.$ Paul, Minnesota.$$ John was able to negotiate with his new contract that the company will pay all his moving expenses. John and Emma will be moving to the Twin Cities area and would like to purchase a single$-$family home.$$

You will need to take the Olson$$s through the house buying process.$$ You will start by determining what they can afford, then move to finding two homes they could buy and end by figuring the total cost of the homes.$$ The project is broken up into $4$ parts.$$ You will turn in part $1,$ it will be graded, you will then use the graded part $1$ to complete part $2.$ This process will continue through each step of the project.$$ Your answers should be typed and be written as if you are explaining your process to the Olson$$s $$ this means you should use full sentences and proper grammar.$$

John$$s $($New$)$ Yearly Gross Income: $$80,000$

$$Emma$$s Yearly Gross Income: $$24,000$

$$Combined Monthly College Loan Payments: $$360($will be payed off in $10$ years$)$

$$Monthly Car Payments: $$400($will be paid off in $28$ months$)$

$$Credit Card $1$: $$180$ per month $($will be paid off in $15$ months$)$

$$Credit Card $2$: No outstanding balance $($they pay the balance each month$)$

Amount in Savings Account: $$12,872$

$3$ bedrooms

$2$ car garage

$2$ bathrooms

Decent back$-$yard for the kids to play in

Attached garage

$4$th bedroom or place for Emma$$s Office

Main Floor Family Room

Private Mortgage Insurance $($PMI$)$ is an insurance you are required to pay until you $$own$20\%$ or more of your house. If you don$$t have $20\%$ of the price of the home to put down, this will add to your monthly bills, however, once you get to the $20\%$ mark, you will no longer have to pay the monthly PMI.

$$Affordability Rule: Your monthly mortgage payments should be no more than $28\%$ of your monthly gross income and no more than $36\%$ of your gross monthly income should be used for debt $($payments for cars, student loans, credit cards, etc$).$

Hint: Find these two values and take the smaller number.$$

Amount down:

Work$/$Explanation: