Suppose you take out a 20-year mortgage for a house that costs $416,531. Assume the following:...

Suppose you take out a 20-year mortgage for a house that costs $416,531. Assume the following:

The annual interest rate on the mortgage is 4%.
The bank requires a minimum down payment of 10% at the time of the loan.
The annual property tax is 2.4% of the cost of the house.
The annual homeowner's insurance is 1.0% of the cost of the house.
The monthly PMI is $68
Your other long-term debts require payments of $819 per month.

If you make the minimum down payment, what is the minimum gross monthly salary you must earn in order to satisfy the 28% rule and the 36% rule simultaneously?

Expert Solution

Cost of house: $416,531

Rate of down payment: 10%

Therefore, amount of mortgage= Cost*(1-Down payment)= $416,531*(1-0.10)= $374,877.90

Monthly payments on this mortgage is $2,271.69 as follows:

Minimum gross monthly salary required is $12,570.93 as follows:

jeff jeffy answered 4 months ago

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