Practice what you learned

Read this case and answer the questions that follow.

Brianna is thinking about buying a home. She has already created a budget and calculated that she has $23,000 for the down payment and closing costs. Her debt payments (a student loan payment of $120, a $170 car payment, and $30 for debt on her credit card) are $320 per month.

Monthly Income $3,800
Other Debt (monthly) $320
Cash Available for Down Payment + Closing Costs $23,000

Brianna found the following interest rates:

30 year fixed mortgage 6.25%
15 year fixed mortgage 5.85%

Use Credit.com’s Home Affordability Calculator to estimate how much home Brianna can afford. Enter her monthly income, other debt, and the 15 year fixed mortgage interest rate into the calculator. Then select “15 Years” for the loan term.

Select the choice that matches your results in the Home Affordability Calculator.

What purchase price can Brianna afford?

Correct! Brianna has $23,000 for her Down Payment + Closing Costs. That’s enough to make a $19,701 down payment plus $3,000 for closing costs. On the “Purchase Price Table” you will find that she can borrow $99,188.70 and buy a home for a purchase price of $115,889.99.
Incorrect. Brianna has $23,000 for her Down Payment + Closing Costs. That’s enough to make a $19,701 down payment plus $3,000 for closing costs. On the “Purchase Price Table” you will find that she can borrow $99,188.70 and buy a home for a purchase price of $115,889.99.

How much will Brianna’s monthly principle, interest, taxes, and insurance payment be if she spends 28% of her income on housing expenses (estimated using a 28% front ratio)?

Correct! The “Maximum PITI (front)” on the “Purchase Price Table” is $1,064, .28 x $3,800 income per month.
Incorrect. The “Maximum PITI (front)” on the “Purchase Price Table” is $1,064, .28 x $3,800 income per month.

What, Why, How Check your understanding

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