Brent's Dream House
'Cause Men Can Dream, Too
Brent Fulanito* is a construction foreman who did not attend college. He is 24 years old, and earns an annual salary of $60,000. He has a car payment of $450.00 each month. He wants to buy his first home in the next few months.
*Please note that all information on this flyer is purely a made-up scenario for an Honors Pre-Calculus assignment and no reference to any single living person was intentionally made by the creator of this page or assignment. No offer or purchase was made on the house mentioned on this flyer.
Reasonable Payment Per Month
I make $60,000 a year, $42,000 after taxes, which leaves me with about $3500 per month for the necessities. I figure that after factoring in the price of gas (~ $150 - $175/month [~$2.80-$3.50/gallon for 12 gallons and needing to fill up once a week]), groceries (~ $200/month), and my car payment ($450/month), I am left with just over $2600 per month. For the past four years, I have saved $454.17 each month to have enough for a 20% down payment on a house. Additionally, I have been saving 15% of each monthly paycheck ($525.00) to go towards a retirement fund and 5% ($175.00) for a savings/in-case-of-emergency account. Because of all of this, I would be able to afford between a $400 - $700/month payment on my house. With the APR on homes currently sitting at 4.712%, the price range I would look into for my first home would be one between $100,000-$120,000 - not because I couldn't afford a larger, more expensive house, but because I don't know how the future will be; so, in the case that I would need to move for whatever reason (marriage, job transfer, etc.), I won't get stuck paying a huge mortgage that I cannot afford.
I chose 1453 E 120th St, Olathe, KS 66061 (featured below) because it is nicely in my price range and accommodates my needs: no major remodeling necessary, a single house instead of a townhome or condo, essential appliances included, and in a nice area.
After a 20% down payment based on the price of the house, a total of $21,800, that leaves me with $87,200 remaining to put on a 30-year fixed rate, which is currently 4.712%. With all of these factors involved, the minimum payment per month would come to a total of $452.88 (not including the smorgasbord of additional taxes required to pay for the house).
With the current monthly price of $452.88 for 30 years, the future value that I would end up paying would be $357,463.51, just over four-times more than what I purchased the house for. If I were to increase my monthly payments by 15% to pay $520.81 (instead of the $452.88 per month), the future value paid on the house would make a net total of $254,559.66. It would be beneficial to pay the extra $67.93 per month because, not only would I be able to pay off the house in just under 23 years, I would also save $102,903.85 in the long run. Because I do not desire to invest my money into the stock market, this would be a wiser choice.