Activity 5.5.docx

# Activity 5.5.docx - Questions 1 Lets assume the Lawrences...

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Questions: 1. Let’s assume the Lawrences will qualify for a 6%, 30-year loan and will make a down payment of 10%. They are currently paying \$300 on a used car auto loan for Shelby and will pay \$220 per month for property taxes and homeowners insurance. Using the “Housing affordability and mortgage qualification amounts” exhibit within the chapter, calculate the following: a. the amount of their affordable monthly mortgage payment Gross monthly income = \$3,600 Downpayment (\$3,600 x .38) = \$1,368 Other debts = \$520= affordable monthly payment of \$848. b. the amount of their affordable mortgage loan amount \$848/6 x 1000 = \$141,333 c. the amount they can afford to pay for a home. \$141,333/(1-.1) \$157,037. 2. What are the tax advantages for the Lawrences of owning a home rather than renting? There are no tax advantages for renting a home. On the other hand, owning a home they will be able to deduct the property tax paid from their income taxes. This would result in a lower tax liability.

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• Summer '13
• N/A
• Debt, Mortgage loan, personal financial planner

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