Question

Tedd E. Bear has an annual salary of $48,000 with no other loans outstanding. Using the 25% guideline from class and with a 20% down payment, how expensive of a home can Tedd purchase using a 4%, 30 year mortgage

Answer 1

Answer:

The total loan value would be of $261,825

Explanation:

In order to calculate how expensive of a home can Tedd purchase using a 4%, 30 year mortgage we would have to calculate first the amount of annual payments as follows:

amount of annual payments = $48,000*0.25 = $12,000

PMT = 12,000/12 = 1000

FV = 0

rate = 4%/12

N = 30*12

Hence, use FV function in Excel  amount after down payment = $209,461.24

this represents 80% of the loan , so total loan value = $209,461.24/0.8 = $261,825

The total loan value would be of $261,825