Kim and Dan Bergholt are both government workers. ?
by Mortgage Rates on Monday, October 11th, 2010 | 4 Comments
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2010 About article Auctions bank banks best Business buyers change Credit Debt Equity Financial First fixed Foreclosure From good Government Help Home house Housing interest Loan Loans Market more Mortgage Mortgages Need News options qualify Rate Rates refi refinance Refinancing should this Time variable would-
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$$$$$ BUYING OPTIONS $$$$$$$$
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
*** 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
i don’t know i hate math!!
To 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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