Personal Finance 1st Edition by Jack R. Kapoor

Exercise 11

Estimating a Monthly Mortgage Payment. Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the affordable home purchase price for the following situation (see Exhibit 9–8). (Obj. 4)

Monthly gross income, $2,950	Monthly estimate for property taxes and insurance, $210
Down payment to be made—15 percent of purchase price	30–year loan at 8 percent.
Other debt (monthly payment), $160

Step 1 of 2

The affordable mortgage payment is calculated as below with the help of below mentioned formula.

In order to calculate affordable mortgage payment, monthly gross payment has been calculated as below. 38%of the monthly gross income is calculated as a guideline for principle, interest, taxes and insurance plus other debt payments.

Affordable monthly mortgage payment is calculated in the table below as:

Affordable mortgage amount is calculated by dividing the monthly mortgage payment per $1,000 based on current mortgage rates – an 8%, 30-year loan and multiply it by $1,000.

From mortgage payment factors table

Therefore, the affordable mortgage amount is calculated as