Chapter 7 – Space (Sue Crull)
Chapter 10 Activity: Buying a Townhouse
The Situation…
Jim would like to buy a townhouse. He is single and just received a promotion at work. He will now make $45,000 a year and has saved $5,000. He also received a small inheritance last year and recently received the check for $15,000. Jim is buying a car for $199 a month and has 42 payments left. He has a credit card balance of $2,100 and pays $80 a month. Jim also pays $120 monthly on his student loan and will be paying for the loan for the next 17 years.
The Questions…
1. Based on the frequently used rule of thumb income multiplier guideline in the chapter, Jim could afford a maximum home loan of __________.
2. Based on the rule of thumb income multiplier guideline, Jim could afford a maximum home purchase price of _________.
3. What is Jim’s monthly gross income? _________
4. Using the common general ratio guidelines from the chapter, what is the maximum monthly amount in dollars Jim should spend for housing expenses? _________
5. Using the same ratio guidelines, what is the maximum monthly amount in dollars Jim can have as a debt load? _________
6. Go to and enter Jim’s income, etc and a 7% interest rate in the Home Affordability calculator in the menu on the left side of the web page, . Use the results from the home affordability calculator. If Jim can get a loan at 7% interest rate, he can afford to buy a home with a sales price of _________.
7. According to the calculator on (7% interest rate), Jim would be able to have a loan amount of _____________.
8. Based on the results from the calculator (7% interest rate), how much can Jim afford for a monthly payment? ___________.
9. Compare the monthly payment provided by the calculator to the amount of monthly payment provided by the "hand calculated ratio" method in question 4. Explain why they are the same or different.
10. Compare the amount of the maximum home price (7%) provided by the calculator to the hand calculated price in question 2. Explain why they are the same or different.
11. What can Jim do financially to improve his ability to purchase a townhouse? Explain your answer.
Jim will buy a townhouse for $125,000 and make a 10% down payment. He is trying to decide whether he should take out a 15 year or a 30 year fixed mortgage.
12. Use the mortgage calculator on , and fill in the following comparison. chart.
|Interest |Term |Down |Loan |Monthly |Total |Total |
|Rate |Years |Payment |Amount |Payment |Loan Cost |Interest |
|7% |30 |10% | | | | |
|7% |15 |10% | | | | |
Notes for above chart:
Home purchase price minus down payment = loan amount
Monthly payment is figured with the Mortgage Calculator on
Monthly payment X years X 12 = total loan cost
Total loan cost minus loan amount = total interest
13. Use the chart you constructed and list advantages and disadvantages for each term (15 vs. 30 year).
14. Which term would you recommend to Jim, and why?
15. Go to and find and print a listing for a townhouse in your area in Jim’s price range.
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.
Related searches
- chapter 7 learning psychology quizlet
- chapter 7 financial management course
- chapter 7 connect
- chapter 7 connect finance
- chapter 7 photosynthesis quizlet
- chapter 7 psychology quizlet
- psychology chapter 7 quiz quizlet
- chapter 7 psychology quizlet test
- chapter 7 learning quizlet
- psychology chapter 7 quizlet exam
- psychology chapter 7 learning
- psychology chapter 7 test questions