Jenny Is Buying a House

Jenny's Finances

Jenny in her two years attending college managed to rack up $20,000 dollars in student loans which she plans to pay off over a period of ten years with monthly payments about $230.16 a month. Jenny is currently employed as a bank teller where she makes $40,000 a year before taxes, her monthly untaxed income is roughly $3,333.33. Jenny has a car and she pays $230 a month in order to pay for the car. Although a life without taxes would be great, Jenny cant get by with out paying $12,000 or 30% of her salary to taxes. After she pays taxes, she is left with roughly $28,000 annual salary or $2,333.33. If Jenny on average spends $283.86 a month of food and roughly $200 a month on gas those total up to $483.86 a month. After subtracting the student loans, gas, food, and car payments Jenny is left $1,389.31 a month that she could use in order to buy a house. And in a more realistic mind set, assuming that she saved $300 a month, she would be left with $1,089.31 in order to spend on a house, utilities, and discretionary spending.

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With the equation above, you are able to find out the minimum payment that Jenny must pay in order to not default on her loan. With this equation, I found that jenny must pay at least $319.28 a month, which leaves her with plenty of money in order to pay for utilities along with possibly starting to save for retirement or start a sinking fund in order to be able to put a down payment on her next house.

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The equation above is used in order to find the maximum price of a house that she is able to afford, which is $211,870.51. But because she is a single woman and there are houses that will suit her needs that are much cheaper and in the long run would be better for her, is why i looked into buying her a $62,100 house.

If Jenny was to increase her monthly payment by 15% the would be paying $362.17 a month. By increasing her monthly payment by 15%, it takes off nearly 12 years of her mortgage and makes her only have to pay for 18.83 years. Which also saves her a lot amount of money as well as time.