Question

g Duane Miller wants to know what price home he can afford. His annual gross income is $67,200. He has no other debt expenses and expects property taxes and insurance to cost $320 per month. He knows he can get a 8.50%, 15 year mortgage so his mortgage payment factor is 9.85. He expects to make a 25% down payment. What is Duane's affordable home purchase price

Answer 1

Answer: $206835.87

Explanation:

Based on the following information, Duane's affordable home purchase price will be calculated thus:

Step 1: $67200/12 = $5600

Step 2: $5600 × 33% = $1848

Step 3: $1848 - $320 = $1528

Step 4: ($1528/9.85) × 1000 = $155126.9

Step 5: $155126.9/(1 - 25%) = $206835.87

Note that for step 5, the affordable home purchase price was calculated as:

= Affordable mortgage amount/(1 - down payment%)

Duane's affordable home purchase price is $206835.87.