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Kim and Dan Bergholt are government employees. They are thinking of buying a home in the Washington DC area for about $ 280,000. Estimates of monthly expenses of the facilities in 220 $ , and maintenance $ 100, property tax in 380 $ , and insurance payments on the house in the $ 50. Only debt consists of car loans with a monthly payment of $ 350.Kim gross income is $ 55,000 a year, Dan is $ 38,000 per year. And save about $ 60,000 in a money market fund, which they used to earn $ 5,840 last year. They are planning to make the most of this to be used to reduce costs by 20% down payment and closing. Borrower who is 30-year-rate loan variable interest rate of 8% of the initial give 20% down payment, and include the cost is 1000 $ plus 3 punte.Voordat you an offer and buy and apply for these loans, and want to get an idea of whether they qualify for het.Raming of the mortgage real estate at reasonable prices, the purchase price within the reach of Bergholts.Veronderstel qualify, what other factors to consider before making a purchase, your home page, what are the changes in the future may pose problems for Bergholts? He said real estate agent Bergholts that if they do not bother to buy, they can be considered as rent. The lease option cost $ 1,400 per month plus utilities, estimated at $ 220 and tenant insurance of $ 25/month. Bergholts and we believe that none of them is likely to be transferred to another place within the next five years. After that, he noted that he may then exit from government service in the private sector. Assuming they remain in the same place over the next five years, Bergholts would like to know whether it was better to buy or rent a house. They expect that the price of rental housing will increase at an annual rate of 3% over the next five years. They expect an annual rate of 5% in money market fund earning. It is expected that all other prices, including utilities, maintenance and taxes to be on the annual rate of 3%. After federal taxes, state and local, and they get only 55% of the marginal dollar contract verdienste.Bepaal or financially more attractive to Bergholts or rent a house for sale during a period of five years to keep them. (And on the assumption that the interest rate hold 8%, and interest payments monthly over a period of five years total $ 87,574) Suppose it turned out to transfer for a year. What is the preferred alternative after a year? (And interest payments on the first year is equal to $ 17,852).
Kim and Dan Bergholt are both werkers.Hulle government was considering buying a home in Washington DCgebied about $ 280,000. Estimates of monthly expenditures virutilities in 220 $ , and maintenance $ 100, property tax in 380 $ , and insurance payments on the house in the $ 50. Only guilty of living on a car loan with monthly payment of $ 350.Kim gross income is $ 55,000 a year, Dan is $ 38,000 per jaar.Hulle saved nearly $ 60,000 in a money market fund, which they used to earn $ 5,840 last year. They are planning to make the most of this to be used to reduce costs by 20% down payment and closing. And the borrower is 30-year loan with a variable rate initial interest rate of 8% grant 20% down payment, and include the cost is 1000 $ plus 3 punte.Voordat you an offer and buy and apply for this loan they want to get an idea of whether they qualify for het.1. Estimates of real estate financing of affordable and accessible to the purchase price Bergholts.2. On the assumption that they are eligible, what other factors to consider before buying and taking out a mortgage 3. What are the changes that may give rise to problems in the future for Bergholts? Real estate agent said that if Bergholts omgeeaan not for sale, and they may consider leasing. Lease option soukoste 1400 $ per month plus utilities estimated at $ 220 and seversekering tenant of $ 25/month. Bergholts and we believe that none of the hulleis likely to be transferred to another place within the next five jaar.Na, note that he may then exit from government service in the private sector. Assuming they remain in the same place over the next five years, Bergholts want to know if ditbeter to buy or rent a house. They expect that the price of rent behuisingen will increase the rate of 3% per annum over the next five jaar.Hulle expect an annual rate of 5% in a money market fund verdien.Alle other awards, including utilities, maintenance and belastingsal expected to rise at an annual rate of 3%. After federal and state taxes enplaaslike, and they get only 55% of the marginal dollar contract verdienste.4. Determine whether more financially attractive to rent Bergholts or home for sale during a period of five years to maintain (assuming that the interest rate hold 8%, and interest payments monthly over a period of five years and total $ 87,574.) 5. Suppose it turned out to be transferred to jaar.Wat is the preferred alternative after a year? (Interest payments on the first year equal to $ 17,852).
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LikeDislikeAsk Clark Howard at http://www.clarkhoward.com that’s his specialty.
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LikeDislike$ $ $ $ $ BUYING OPTIONS $ $ $ $ $ $ $ $
HOME PURCHASE PRICE
Downpayment
Explanation 20% downpayment: $ 280,000.00 x 20% (.20) = $ 56,000.00
Loan Amount
Explanation : $ 280,000.00 – $ 56,000.00 = $ 224,000.00
Monthly mortgage Payment
(principal and interest) based on Wells fargo bank computation
Monthly Mortgage payment $ 1,644.00
Utilities $ 220.00
Maintenance $ 100.00
Car Loans $ 350.00
Property Tax $ 380.00
Insurance $ 50.00
Total Monthly Expense $ 2,744.00
Explanations: Downpayment of 20% (.20) x $ 280,000.00 = $ 56,000.00 $ 56,000.00
Closing Cost equal $ 1,000.00
Plus 3% Points $ 6,720.00
Explanation: $ 224,000.00 loan amount x 3 points (.03) = $ 6,720.00
Total Closing Cost $ 63,720.00
Explanations: (at one time only when you your house) . Add Downpayment 20% ($ 56,000.00) + closing cost ($ 1,000.00) + plus 3% points ($ 6,720.00) = $ 63,720.00
1 Year mortgage payments (principal plus Interests)
1,644.0012.00 $ 19,728.00
Explanations: $ 1,644.00 monthly mortgage x 12 months period of payments = $ 19,728.00
5 Years Mortgage Payments (principal and Interests)
$ 19,728.00 5.00 $ 98,640.00
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LikeDislike*** RENTING OPTIONS ***
Monthly Rent $ 1,400.00
Utilities $ 220.00
Insurance $ 25.00
Total Monthly rent Options $ 1,645.00
1st year Rent1,645.0012.00 $ 19,740.00
Explanation: $ 1,645.00 x 12 months = $ 19,740.00
2nd year Rent19,740.001.03 $ 20,332.20
Explanation: $ 19,740.00 x (1 + 0.03 pts) = $ 20,332.20 Tax expect to increase 3% annual rate.
3rd year Rent20,332.201.03 $ 20,942.17
Explanation: $ 20,332.20 x (1 + 0.03 pts) = $ 20,942.17 Tax expect to increase 3% annual rate.
4th year Rent20,942.171.03 $ 21,570.44
Explanation: $ 20,942.17 x (1 + 0.03 pts) = $ 21,570.44 Tax expect to increase 3% annual rate.
5th year Rent21,570.441.03 $ 22,217.55
Explanation: $ 21,570.44 x (1 + 0.03 pts)= $ 22,217.55 Tax expect to increase 3% annual rate.
5 years Monthly Rent $ 104,802.35
Money Market Income for 5 years $ 76,576.89
Explanation : $ 60,000.00 x (1 +0.05)^5 = $ 76,576.89 use method of scientific caluculator.
Money Market Income after 5 years. $ 16,576.89
Explanation : $ 76,576.89 – $ 60,000.00 = $ 16,576.89
NET Income for RENT 5 years $ 88,225.45
explanation: 5 years Rents vs. Money Market Income after 5 years.
$ 104,802.35 – $ 16,576.89 = $ 88,225.45
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LikeDislikeTo judge their qualification for the 30 year variable rate loan, we need to estimate weather the Bergholts can afford the loan or not. We need to compute all the annual costs relating to the loan plus other expenses. We then compare costs to the combined annual income. If costs > income, they cannot afford the loan and would not be qualified, and vice versa.
Annual repayment cost of mortgage is
Final value of mortgage = price * (1 – down payments) (1+r) ^ n
= 280,000 (1-20%) * (1.08) ^ 30 = 2,254,035
Sum of repayments can be formulated by
S = {[A* (1+r) ^ (n –1)] / r} = [A* 1.08^(30 – 1)] / 0.08 = 113.283 A
where A = annual payment
Since Sum of repayment = Final value of mortgage
Therefore, 113.283A = 2,254,035
A = $ 19,897
Expenses
Maintenance…………………………………….100
Property tax……………………………………..380
Home Insurance…………………………………50
Total expenses relating to property…………….530
Utilities………………………………………….220
Car loan…………………………………………350
Total Monthly Expenses…………………………1100
Total Annual Expenses……………………….$ 13,200
Income
Gross Income from salary = 55,000 + 38,000 = $ 93,000
Net Income (55% marginal rate) = 93,000 * 55% = $ 51,150
Income from savings = 60,000 + 5,840 – Down Payment (56,000) = $ 9,840
5% annual earning on money market fund = 9,840 * 5% = $ 492
Net annual income after purchase of property = 51,150 + 492 = $ 51,642
Therefore, Affordability = Net annual income – (expenses + annual repayments) = 51,642 – (13,200 + 19,897) = $ 18,545
The Bergholts can afford to purchase the house because their annual income will exceed costs by $ 18,545 when they make a purchase.
If the Bergholts want a full mortgage on the cost of the house then the rules of qualification state that the gross monthly salary should be 35% greater than sum of the monthly mortgage, monthly tax and other monthly debt payments.
Monthly mortgage = 19, 897 / 12 = $ 1,658
Monthly debt from car loan = $ 350
Estimated property tax = $ 380
monthly expenses for utilities = $ 220,
maintenance = $ 100
home insureance = $ 50
Then monthly debt = 1658 + 350+380+220+100+50 = 2758
On the other hand, the monthly salary = 93,000 / 12 = 7,750
The after-tax income = 7750 * (1-35%) = $ 5037.5
Therefore, after tax income > monthly debt, the loan is affordable.
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