The house you can afford.
a) Using the link https://www.fool.com/mortgages/how-much-house-can-i-afford.aspx and calculate how big of a mortgage you can afford based on the income you expect to earn once you graduate. The bottom two ratios on the page need a little explanation. In general, lenders like to cap the maximum monthly housing allowance (including taxes and insurance) by the lesser of these two ratios: 28% and 36%. According to the Gurus, your monthly housing allowance may not exceed 28% of your total monthly income and your total monthly obligations (monthly housing allowance plus any other long-term obligations) may not exceed 36% of your monthly income. So, leave those numbers as they appear. Use $5,500 for property tax, $3,000 for home insurance, and $25,000 for down payment.
a. Calculate the numbers you get for a 1.5%, 15 year mortgage
b. Calculate the numbers you get for a 2.5%, 30 year mortgage
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b) Using the “Mortgage amount” that you obtained for the 2.5%, 30 year mortgage, calculate your monthly payment for the loan? You will need to use the following link: http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx?ic_id=home_smart-spending_mortgages_globalnav. YOU WILL NEED TO COPY AND PASTE THIS PAGE IN A WORD DOCUMENT, OR COVERT TO A PDF. THIS NEEDS TO BE SUBMITTED WITH YOUR ASSIGNMENT.
c) If you have five years to save $10,000 for down payment for your future house, what steps would you take to save the amount?
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