Question 1
The cost of a home is financed with a $260,000, 30-year fixed-rate mortgage at 7%. The buyer will make 360 payments of $1729.00. Prepare a loan amortization schedule for the first three months of the mortgage. Round to the nearest cent.
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Question 2
Use the following advice from most financial advisors to solve the problem.
∙ Spend no more than 28% of your gross monthly income for your mortgage payment.
∙ Spend no more than 36% of your gross monthly income for your total monthly debt.
Round all calculations to the nearest dollar, if necessary.
Suppose that your gross annual income is $96,000.
(a) What is the maximum amount you should spend each month on a mortgage payment?
(b) What is the maximum amount you should spend each month for total credit obligations?
(c) If your monthly mortgage payment is 65% of the maximum amount you can afford, what is the maximum amount you should spend each month for all other debt?
◦ (a) $2240; (b) $2880; (c) $1424
◦ (a) $26,880; (b) $34,560; (c) $17,088
◦ (a) $2240; (b) $2880; (c) $1456
◦ (a) $2240; (b) $2880; (c) $368
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