You are going to purchase a house which costs $300,000. Your annual income is currently $60,000....

You are going to purchase a house which costs $300,000. Your annual income is currently $60,000. The bank you are going to get the mortgage from uses a 28% qualifying rate (a maximum of 28% of your gross monthly income can go to your monthly payment). How much will you need to put down in order to buy this house? Use the following parameters:

 30 year mortgage

 4.7% annual interest rate

Solutions

Expert Solution

Mortgage eligibility = 0.28*60000 = 16800

Monthly mortgage payment = 16800 / 12 = 1400

t = 30*12 = 360 months

i = 4.7% / 12 = 0.391667% per month

Loan amount = 1400*(P/A,0.391667%,360)

= 1400*((1 + 0.00391667)^360-1)/(0.00391667*(1 + 0.00391667)^360)

= 1400*((1.00391667)^360-1)/(0.00391667*(1.00391667)^360)

= 1400*192.8126948

= 269937.77

Down payment required = 300000 - 269937.77 = 30062.23 ~ 30062

Rahul Sunny answered 1 year ago

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