Question

Suppose you take out a 20-year mortgage for a house that costs $386,150. Assume the following:

• The annual interest rate on the mortgage is 3%.
• The bank requires a minimum down payment of 19% at the time of the loan.
• The annual property tax is 2.1% of the cost of the house.
• The annual homeowner's insurance is 0.6% of the cost of the house.
• The monthly PMI is $54
• Your other long-term debts require payments of $555 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?

Round your answer to the nearest dollar.

Answer 1

Given,

Cost of house= $386,150

Down payment= 19%

Hence mortgage amount= $386,150*(1-19%) = $312,781.50

Monthly mortgage payment= $ 1,734.68 as follows:

Minimum gross monthly salary needed in order to satisfy the 28% rule and the 36% rule simultaneously= $9,491

Calculated as follows: