PreCalc Finance Project... Michael Rohledder Hour 3
I decided that I could spend $1750.00 monthly on my house based on my monthly income of $3355.55. I reached that monthly income by taking 30% of my $70,000 income for taxes, so I was left with $49,000 or $4083.33 monthly and after student loans and car payments totaling $727.78 per month I was left with $3355.55 per month. After I did research I decided that I should spend 30% of my gross income (before taxes) on housing, which equaled $1750 maximum for housing. I decided that was a good amount because I am living alone and that gives me $1605.55 a month leftover for all other necessities.
Afford to Borrow
Using my finance app I found that I could borrow a maximum of $313,110.000 for housing. I reached this number using my maximum monthly payment of $1750, I found an interest rate of 4.75% (Wells Fargo). When I found a house that I liked for $300,000 I plugged that in as my present value and then I found that I could borrow $313,110.00, although I only borrowed $250,000 because the house I found was only $300,000.
Minimum Mothly Payement
Using my finance app again I reached my minimum monthly payment of $1564.43 based on a house of $300,000, interest rate of 4.75%, and payments monthly for 30 years.
Minimum Monthly Payment + 15%
My minimum monthly payment + 15% equaled $1799.99. Using this number plugged in to the present value formula with the variable "t" unknown I found "t" to equal 22.7 years or 22 years and 8 months. Therefore, cut off 7 years and 4 months of house payments and I would end up saving $72,043.23. It would be a tough decision to up my payments because I would have to be extremely careful with my money because it is over my maximum monthly payment.
Fargo, W. (2014). Rates and payments results. Retrieved from https://www.wellsfargo.com/mortgage/buy/tools/rate_calc_results
Zillow. (2014). Zillow find your home. Retrieved from http://www.zillow.com/homedetails/12913-Reeder-St-Overland-Park-KS-66213/75669575_zpid/