House Hunting In OP

Hour 2 Mrs. Stein Pre-Calc Project by Humza Sagarwala

Scenario 3

Jenny went to college for two years, and then dropped out. Unfortunately, by the time she dropped out of college, she had $20,000 in student loans. She has been working as a bank teller for the last three years. Her salary is $40,000. She also has a car payment of $230 per month. She is excited to buy her first home.


Monthly

Gross Monthly Income- $3,333.33

Net Monthly Income- $2,333.33


In reality not 100% of peoples' paychecks are used to pay bills, naturally people spend on basic requirements for human life. In addition to requirements for human life, also is the need to save for a rainy day. These numbers will be accounted for in the final analysis to make it as accurate as possible.

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Food- $549.92 (23.6%)
Entertainment- $217.08 (9.3%)
Savings- $309.75 (%)
Car Payment- $230 (9.9%)
College Payment- $230.16 (9.9%)
Other- $296.42 (12.7%)

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Total Monthly Expenses- $1,833.33


$500 is the amount remaining, and this is the monthly payment Jenny can afford. For the last three years this amount has been added to her savings account.




Price Range

After using the Present Value Formula (PV), in addition to consulting with Barry Allan from Prime Lendings, Jenny discovered the maximum she could spend on a house is $115,355.89. Because up until now the "remaining" $500 has also gone into her savings, she has $29,151 in her account. Roundpoint Mortgage's rate is 4.408% as of 1/2/14 at 2:11 PM CST. The work is as shown below.




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Location Location Location

Jenny found 401 South Ridgeview Road, Olathe, KS 66061 a suitable 3 bedroom, 2 bathroom, 1,264 sq. ft. house in Olathe KS. The house is listed on realtor.com for $79,000 which is well within her price range. She takes a mortgage of $59,000 at 4.408%.She would pay a minimum of $295.73 per month in order to have the mortgage payed in 30 years. The minimum payment is also ideal rather than paying $500, which is the most she wants to pay. It is particularly appealing because it is a mere 0.3 miles from the Bank of Blue Valley which is most likely where she can work at. With the additional bedrooms she would be able to accommodate house guests or use as additional storage; the choice is hers.


Increased Principle

Jenny wants to know how much time and money she would save by increasing the monthly payment 15%. If she increases her minimum payment to $340.09 then she will save $13,763. She will also be able to pay back the loan entirely in 23.1 years, saving herself 7 years of paying. I recommend Jenny increase her monthly payment because she will save money and she can afford to do so.




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References

National Association of Realtors. ( 2013, September 20). 401 S Ridgeview Rd. Retreived from http://www.realtor.com/realestateandhomes-detail/401-S-Ridgeview-Rd_Olathe_KS_66061_M88422-32089?row=30


Home Improvement Review. (n.d). Free Christian Clip Art Image of A House A Home Cropped Image. Retrieved from http://home-improvement-review.com/free-christian-clip-art-image-of-a-house-a-home-cropped-image.html


National Association of Realtors. (2014, January 2). Kansas City MO Mortgage Rates. Retrieved from http://www.zillow.com/mortgage-rates/mo/kansas-city/


Bureau of Labor Statistics. (2013, September 10).Consumer Expenditures 2012. Retrieved from http://www.bls.gov/news.release/cesan.nr0.htm