# Harper's House Purchase- Scenario 2

### By Connor Leimer hr.5 Stein

## Harper's Income

Harper's annual salary=$70,000

Annual salary after (30%) income tax=$49,000

**Monthly salary after taxes= $4083.3**

**Work Shown:**

70,000 x 0.7= 49,000

49,000/12 = 4,083.3

## Monthly Expenses

Car payment of $325 a month

Student loan (10 year term at 6.8%) of $402.78 a month

Food ($100/week x 52 weeks/12) at $433.33 a month

Utilities at $150 a month

Insurance of $100 a month

Gas for car $200 a month

Miscellaneous expense $200 a month

**Total monthly expense of $1,811.11**

**Monthly salary after expenses and taxes= $2,272.22**

**Work Shown**

13,000/12=1,083.33

3,900/12= $325 (car payment)

325+402.78+433.33+150+100+200+200=1,811.11

(monthly salary after tax and expenses)

$4,083.33-$1,811.11= $2,272.22

## Harper's House Located in the Olathe area because houses are more affordable for Harper's income. | ## Student Loan Monthly payment of $402.78 | ## Recommended loan of $200,000 A recommended loan would be $200,000 with monthly payments of $1010 and it would leave Harper with enough money to invest in savings or have extra money for emergencies. |

## House Purchase

**House Cost= $119,950**

**10% downpayment of $12,000**

(Saved monthly income of $2,000 for 6 months)

**House is now $107,955**

**Minimum Monthly Payment of $545 for 30 years (at 4.48%)**

**Total payment is **

**$545 (monthly payment) X 12 months X 30 years = $196,200**

**Work Shown**

119,950- 12,000=107,955

## Maximum Loan

Because Harper's monthly budget is $2,272, she can afford a monthly payment of $2,272 which would allow a loan of $400,000. Even tho she can technically afford a loan of $400,000 that doesn't mean she should take it. It would be better to borrow around $200,000 and have some extra money in her monthly budget for savings.

At $200,000 she would pay around $1,010 a month. This is the most practical loan because if it was any higher she would barely have $1,000 dollars to live on after expenses and payments. She needs to have money for unexpected expenses or emergences. She also couldn't invest in a retirement or savings account. Just because you can afford a loan doesn't mean you should take it. We have to factor in the fact that people save and invest money and may need money for miscellaneous expenses.**$1,262 remaining for investments, savings or extra expenses.**

**Work Shown**

$4083-$1,811= $2,272

$2,272- $1,010= $1262

## Minimum Monthly House Payment For 30 years she can pay, at a minimum, $545 a month at 4.48% interest. | ## Difference of Time (15% increase) Increasing the monthly payment by 15% changes the loan from 30 years to only 23 years. By reducing the time, the total cost ends up being less which saves you money! This is due to the interest rate not applying to those 7 years and thus Harper not having to pay that interest. | ## Maximum loan of $400,000 She can afford to borrow $200,000 because she has the ability to pay up to $1,500 a month. The maximum she could borrow would be $400,000 (at 4.5% for 30 years), however a loan payment must include taxes and insurance of approximately 1/4 of the loan payment amount. Therefore, a $400,000 loan would have a monthly payment of $2,200 however she would also pay $550 more for taxes and insurance making her total monthly cost $2,750. This reduces what houses she can afford to about $300,000 at the very most. This would be impractical but it is affordable and the maximum loan. |

## Minimum Monthly House Payment

## Difference of Time (15% increase)

## Maximum loan of $400,000

## Minimum Payment Increased by 15%

**New monthly payment of $626.75 (15% increased)**

Minimum payment

**$545 (monthly payment) X 12 months X 30 years = $196,200**

New Payment increased by 15%

**$626.75 (monthly payment) x12 months x 23 years= $172,776**

**Time Saved= 7 years **

**Money Saved= $23,424**

**Work Shown**

30 years-23 years= 7 years

$196,200- $172,776= $23,424

## Reference Slide in APA

*House for Sale*[Monograph]. Retrieved from http://www.zillow.com/homedetails/821-E-Northview-St-Olathe-KS-66061/75606875_zpid/.

Website: Unknown. (2013, December 21). *Zillow. *Retrieved from* *http://www.zillow.com.