# Harper's Home

## Who is Harper?

Harper has a bachelor's degree in business and is currently twenty five years old. She is managing a retail store and makes 70,000 dollars every year. Like many of her friends, Harper has many bills to take care of and this is how she figured out the perfect house that would fit her budget!

On your right is Harper's very first home!

## Harper's Plan!!!

These are the steps Harper took to figure out how much she could afford to pay per month on a house and be able to pay off other loans and bills.

## How did Harper decide this was the perfect first house?

First, Harper is single and she just got out of college and didn't have kids. Automatically, she knew she didn't need a luxurious house with multiple rooms, so she picked a simple house with a low enough cost for a single person like her to keep up with. The house is also located in Overland Park and her store isn't too far from the house. Plus, the house appeared very pleasing and suited her interests; therefore, Harper bought it!

## STEP 1- MONTHLY PAYMENTS

First, Harper made a list of expenses that she knew she had to take care of. The money she had to spend monthly was categorized in the following expenses: taxes, car payments, student loans, food, and luxury. She took her salary, which is 70,000 dollars, and subtracted all the expenses to come up with 3,246.8 dollars that she could spend monthly on a house at the most. On the left is the work Harper used to figure out her monthly amount that she would be able to afford.

## STEP 2- HOW MUCH CAN HARPER AFFORD TO BORROW

Harper realized she had 3,246.8 dollars and decided she could pay about 3,000 dollars maximum roughly for her house payments, and that they rest of her money would go towards any emergencies or other expenses.She used the present value equation to figure out that she could afford to borrow around 575,000 dollars if she chose to pay 3,000 dollars per month. She decided to stick with buying a house that allowed her to borrow 169,900 dollars and she can pay 886 dollars a month and still have money left over for emergencies.

## STEP 3- MINIMUM MONTHLY PAYMENT AND INTEREST RATE

Harper decided to go to the Reece and Nichols website to check out houses. She first saw the houses that were available, within her price range, and in Overland Park or Olathe. She found a house with three bedrooms and two bathrooms that costed 169,900 dollars. The interest rate of the house was 4.75 percent, and it was great because it wasn't to high. The minimum payment required to pay back the 169,900 dollars plus interest is 886.3 dollars a month. The way Harper figured that out was using the present value equation shown on the left.

## STEP 4- INCREASED PRINCIPLE BY 15%

Harper added fifteen percent of the minimum monthly payment to 886.3 and she got a new monthly payment of 1,019.2 dollars. The amount of money she could be saving by paying roughly 200 dollars more a month is 41,315.4 dollars. The amount of time she could be saving is approximately 8 years. The work Harper did to figure this out is shown below.

## Reference

Barton C., Fate S. (2001, January). Reece and Nichols. Retrieved from http://www.reeceandnichols.com/homes-for-sale/KS/Overland-Park/66207/9350-Lamar-Avenue-109222967