In: Finance
1. Assume you are interested in purchasing a $350,000 house with the following characteristics:
- 80% Loan to Value Loan @ 4% interest (30yr, fully amortized)
- Property taxes = 1.2% of purchase price per year
- Homeowners Insurance = $1,000/yr
Homeowners Association Dues = $200/mo
Payment to Income Ratio = 28%
Total Obligations to Income Ratio = 35%
Questions:
A. How much do you have to earn to afford this house (assuming zero consumer debt)
B. Will you still be able to afford the house if you have $300/mo in student debt payments and a $200/mo car payment?
Loan Amount = 3,50,000 * 80 / 100
= $2,80,000
Interest on loan = 2,80,000 * 4 / 100 = 11,200
Computation on Total Payment ($)
- Property Tax @ 1.2% = 4200
- Homeowner Insurance = 1000
- Dues ($200 * 12) = 2400
- Interest on Loan = 11200
Total = 18,800
Payment to income Ratio= 28%
= 28% * 18800 / x
x = 67,142
(A) Earning = 67,142
(B) No, i am ot able to afford house in this situation. because my i expend maximum $ 23,499 but obligation comes $ 24,800.
Notes:-
Total Payment calculated above = 18,800
- Add:- Student Debt pay (300 * 12) = 3600
- Add:- Car Payment (200 *12) = 2400
Total = 24,800
Total Obligation to income ration = 35%
35% = x / 67,142
x = 23,499