# Spacious Suite Sale

## The Monthly Payments

A mortgage payment in the United States is established by the lowest of the following two ratios.

Jenny's annual income: \$30,000
\$30,000 / 12 = \$2,500

Front ratio: .29 x \$2,500 (monthly gross income) = \$725

Back Ratio: .41 x \$2,500 - \$630.16 (monthly debts) = \$395 = Maximum mortgage payment

Rationale: Because the back ratio is the lowest amount, the back ratio will be used instead of the front ratio. In other terms, Jenny's monthly debts are too high to be able to use the front ratio, therefore she is forced to use the back ratio.

## Total Mortgage Amount

The largest mortgage that is commonly given is the FHA (Fair Housing Administration) 97% LTV (loan to value) mortgage. This means that the lowest down payment usually available is 3%. For example, the home at 146th W Warren St. is priced at \$47,500 making the down payment \$1,425, leaving the mortgage amount at a total of \$46,075.

## Minimum Payment Option

With the \$395 going toward a house and a 3% down payment of \$1,425 and an interest rate of 3.75% (Zillow.com - 3/23) , this put the minimum payment at \$365 per month.

P&I - \$213
Insurance - \$67
Taxes - \$48
PMI - \$37
Total - \$365

(Zillow.com)

## Increased Principle

With an additional \$54.57 per month (+15%), she can payoff the mortgage in 20 years and 7 months. Shortening her amortization period by 9 years and 4 months. In doing this, she will save a total of \$10,581.74 in interest.

## Amortization for minimum mortgage

Mar, 2015 - \$69.40 - \$143.98 - \$46,005.60

Apr, 2015 - \$69.61 - \$143.77 - \$45,935.99

May, 2015 - \$69.83 - \$143.55 - \$45,866.16

Jun, 2015 - \$70.05 - \$143.33 - \$45,796.11

Jul, 2015 - \$70.27 - \$143.11 - \$45,725.84

Aug, 2015 - \$70.49 - \$142.89 - \$45,655.36

Sep, 2015 - \$70.71 - \$142.67 - \$45,584.65

Oct, 2015 - \$70.93 - \$142.45 - \$45,513.72

Nov, 2015 - \$71.15 - \$142.23 - \$45,442.57

Dec, 2015 - \$71.37 - \$142.01 - \$45,371.20

Jan, 2016 - \$71.60 - \$141.78 - \$45,299.60

Feb, 2016 - \$71.82 - \$141.56 - \$45,227.78

## Sources

Mortgage Qualifying Ratios. (n.d.). Retrieved March 24, 2015, from http://www.Quickenloans.com/mortgage-glossary/qualifying-ratios

Mortgage Rates - Today's Home Loan Rates and Trends | Zillow. (n.d.). Retrieved March 24, 2015, from http://www.Zillow.com/mortgage-rates

Mortgage Loan Calculator. (n.d.). Retrieved March 24, 2015, from http://www.mlcalc.com/#loan-46,075

Mortgage Payoff Calculator. (n.d.). Retrieved March 23, 2015, from http://www.calculator.net/mortgage-payoff-calculator.html