The house you can afford.

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

ONCE YOU ENTER YOUR INFORMATION, YOU WILL BE ALLOWED TO SAVE THE INFORMATION BY CLICKING ON “PDF REPORT”. YOU WILL NEED TO SUBMIT THIS PDF DOCUMENT WITH YOUR ASSIGNMENT.

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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