Question

Michelle Duncan wants to know what price home she can afford. Her annual gross income is $45,000. She owes $790 per month on other debts and expects her property taxes and homeowners insurance to cost $340 per month. She knows she can get an 10.00%, 30-year mortgage so her mortgage payment factor is 8.78. She expects to make a 20% down payment. What is Michelle's affordable home purchase price? (Round your answer to the nearest dollar amount.)
Group of answer choices

$43,870

$635

$655

$41,999

$39,784

Answer 1

Answer:

$41,999

Step-by-step explanation:

Annual income = 45000

monthly income = $45000/12 months = $3750

mandatory expense at 38% rule = $3750 x 0.38 = 1425

other debt = 790

tax and insurance = 340

= 1425 - 790 - 340

= 295

balance left = 295

mortgage payment = (295/8.78) x 1000

= $33,599

purchase price = monthly payment/ 1- % of down payment

= $33599/1 - 0.20

= 33599/0.80

= $41,999