# Finance Project - Scenario 2

## \$249,950

Harper can afford this beatiful estate in Leawood as her budget allows her to put a 20% down payment, allowing her to purchase a house up to \$250,000, as this one is just within her price point.

## Budget Per Month

Harper being 25 and a two year graduated student with a job, has 10 years of student loans to payoff, as well as car payments. She only has a totally monthly net income of 5,833.33, but when subtracting out her monthly dues, (\$459- student loan \$325- car payments) she has a budget and income of \$5049.33. Given the fact that all that income will not solely go towards a house, its safe to say she will be able to afford something with a mortgage of \$1,633.33 a month, as using 28% of her income towards mortgage it is at the maximum of her budget. 28% is a common percentage for mortgage as I researched what banks will commonly loan based off a person's income. With \$1,633.33 as the maximum Harper should maintain a budget below this to stay financially stable.

## How Much To Borrow?

A comfortable amount of money based on Harper's budget to borrow for a home is \$215,000. I figured in that her living expensives in a conservative manner would round out to be near \$2,000 a month, and if her maximum budget on a house a month is \$1,633, she would still have around \$2,200 leftover of extra income, for saving or other expenses.

## 30 Year Fixed Rate Loan

As of March 25, 2015 on the Capital Federal site, for a 30 year fixed rate loan it is 3.75%. (capped.mortgagewebcenter.com)

## Minimum Payment

If Harper borrow's \$215,000 for 30 years at an interest rate of 3.75% the minimum possible monthly payment is \$995.70 with an approved mortgage. This payment would not be including insurance or taxes.

## Increasing Minimum Payment

Increasing the montly payments by 15%, is calculated out to save Harper a total of \$34,064 and a total of 6 years of payments.

## Amortization

In the first year of amortization of Harper's loan, she will have a yearly total payment of \$11,948.40, of which \$3,953.39 is applied to principal while \$7,995 goes towards the interest, bringing the overall loan down from \$215,000, to \$211,046.