1. Based on each of the following three methods, what is (a) the maximum monthly...
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Finance
1. Based on each of the following three methods, what is (a) the maximum monthly mortgage payment, (b) maximum mortgage size for which you qualify, and (c) value of the home you can afford to buy
PITI Ratio
PITI Plus
80% of the Appraised Value Rule
2. How would your answer change for a 15-year rather than a 30-year mortgage?
3. How would your answer change if the mortgage interest rate increased to 8%?
4. Based on these calculations, what is the maximum value of the home and mortgage you would be willing to buy?
Annual gross income = $80,000
Estimated monthly real estate insurance and taxes = $300
The anticipated interest rate on a mortgage loan: 4%
Mortgage maturity: 30 years
Current non-mortgage monthly debt payments = $500
Funds available for down payment and closing cost = $25,000
Closing cost estimates = $5,000
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