can I please get help with my assignment?

Anonymous
timer Asked: Jul 3rd, 2018
account_balance_wallet $15

Question description

Homes: Renting and Buying Worksheet

  • Complete the “Buy or Rent Your Next Home” exercise on the Bankrate website: http://www.bankrate.com/calculators/mortgages/rent-or-buy-home.aspx
  • Consider howeconomic conditions affect your decision to buy or rent (for example interest rates, unemployment rate, and inflation).

  • Review Exhibit 7-4 in Ch. 7, page 225 of Focus on Personal Finance.
  • Review Exhibit 7-6 in Ch. 7, page 230 of Focus on Personal Finance.
  • If you were buying a home valued at $215,000, what is the minimum down payment you would need in order to avoid paying private mortgage insurance (PMI)? PMI is requested to protect the lender from potential default loss when there is insufficient equity in a home.
  • Debt payments-to-income ratios will likely be considered as you apply for a mortgage. The Focus on Personal Finance text suggests keeping this ratio below 20%. A mortgage lender will have their own ratio for all debt payments, including mortgage-to-income ratio, before they will consider approval. Using this information, answer the questions and show your calculations in the table below:

Respond to each of the following in a minimum of 50 words:

  • What was the recommendation?
  • What were the factors that led to that recommendation?
  • Do you agree or disagree with the recommendation? Why?

Explain in a minimum of 100 words the main benefits and drawbacks of renting versus owning a home.

Summarize in at least 100 words the steps in the home-buying process.

Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the affordable home purchase price for the following situation. Show your calculations in the table below.

Monthly gross income: $2,950

Other Debt, monthly payment: $160

Down payment to be made: 15% of purchase price

Monthly property tax and insurance: $210

30-year mortgage at 6%

Enter your calculation and response in this column.

Step 1. Start with the monthly gross income.

$2,950

Step 2. Multiply Step 1 by .33 (which is the decimal form of 33%) for a PITI (principal, interest, taxes, and insurance) guideline.

Step 3. Subtract “Other Debt” payments from the result of Step 2 to determine the Affordable Monthly Mortgage Payment.

Step 4. Divide the result of Step 3 by 6.00 (this is the mortgage payment factor from Exhibit 7-7 based on a 30-year loan at 6%) and then multiply this by $1,000.

This is the Affordable Mortgage Amount.

Note: Does this amount seem reasonable for this scenario? If not, double-check your calculations.

Step 5. Divide the affordable mortgage amount by .85 (This is 1 minus the down payment percentage) to determine the Affordable Home Purchase.

Note: Does this amount seem reasonable for this scenario? If not, double-check your calculations.

  • Net monthly income: $4,000
  • Expected full mortgage payment (PITI): $1,000
  • Student loan payment: $250
  • Car payment: $300

Enter your calculation and response in this column.

What is this person’s debt payments-to-income ratio?

What is this person’s debt payments-to-income ratio when the full mortgage payment is included?

If the mortgage lender required total payment to income ratio below 40%, would this person meet that standard?

If the mortgage lender required total payment to income ratio below 45%, what is the maximum monthly payments this person could have to meet the standard?

Tutor Answer

Teacher_Lucia
School: University of Maryland

Review this, this is the FINAL answer :) thank you

1




Review Exhibit 7-4 in Ch. 7, page 225 of Focus on Personal Finance.
Review Exhibit 7-6 in Ch. 7, page 230 of Focus on Personal Finance.
If you were buying a home valued at $215,000, what is the minimum down payment
you would need in order to avoid paying private mortgage insurance (PMI)? PMI is
requested to protect the lender from potential default loss when there is insufficient
equity in a home.

Answer:

It is recommended by the financial advisors that mortgage payment should not be more than 28%
of individual’s monthly household income. Considering that fact, minimum payment requires a
down payment of less than 20% which often requires PMI and in return it will increase their
monthly payment. For a $250,000 home, the minimum down payment of 20% will be $43,000.


Debt payments-to-income ratios will likely be considered as you apply for a mortgage.
The Focus on Personal Finance text suggests keeping this ratio below 20%. A
mortgage lender will have their own ratio for all debt payments, including mortgageto-income ratio, before they will consider approval. Using this information, answer the
questions and show your calculations in the ...

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Anonymous
Awesome! Exactly what I wanted.

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