Jenny's First Home

By Anika Rasheed

What Can Jenny Afford?

Jenny is a bank teller and earns $40,000 a year. She has a car payment of $230 per month and student loans worth $20,000 which she must pay off in ten years. To find out what type of home she can afford, first she has to find out her monthly student loan payment. The interest rate is 6.8%. Using the equation featured, she finds her monthly student loan payment to be $230.17.

Now, Jenny must find how much money she has each month in order to figure out how much she can put toward a mortgage payment.

Monthly Rationale

Jenny has to have enough money for other expenses such as food, shopping, and bills. At most, only 30% of the $1873.16 should go toward her house payment monthly. This means that, at most, she can afford to have a $561.94 monthly house payment.

Total Rationale

For a 30 year home loan with a rate of 4.625% (rate found at Bank of America site) with a maximum $561.94 monthly payment, Jenny can afford a home worth $109,297.18 total.

Jenny's House

Jenny decided to purchase this homy condo in Overland Park, KS for $91,500. It has been updated and has more than enough space for her. It also fits nicely into her price range.

Monthly Payment

Since most banks require a 10% down payment, the present value of the loan becomes $82,350.

Jenny finds her monthly payment for a 30 year fixed rate (4.625%) loan to be $423.34. This would also leave her with $1449.82 for other expenses.

Increased Principle by 15% Comparison