1. Personal Annual Income
The personal annual income is $19,200.
2. Monthly Payment
a) The monthly amount is found by dividing the annual income by 12:
$19,200 / 12 = $1,600.
b) The monthly payment is maximum 33% of the monthly income, which is:
$1,600 ∙ 33% = $1,600 ∙ 0.33 = $528.00.
c) Maximum required payment (monthly payment minus fees):
$528.00 / 1.15 = $459.13.
This is the maximum amount that a person can afford to pay each month for a home loan.
3. Loan Amount
Using the Excel table, the maximum amount for home loan was found for monthly payment $459.13 at 4.18% APR for 30 years. This amount is $94,113.00. Thus, a person can afford a house for about $94,000.
4. Down Payment
The down payment has been obtained from the saved money from 14th birthday, namely for 9 years. Each month, $95 has been saved and kept in the bank at APR 2.4%. Thus, annually a person saves: $95 ∙12 = $1140. The amount saved was calculated using Excel function. The exemplified calculation:
Annual interest, year 1: $1,140 ∙ 2.4% = $27.36
The annual saving. Year 1: $1,140 + $27.36 = $1,167.36
Annual interest, year 1: ($1,140 + 1,167.36) ∙ 2.4% = $55.38
The annual saving. Year 1: ($1,140 + 1,167.36) + $55.38 = $2,362.74
The full results are presented in Table 1.
Calculations of the down payment
Hence, by the time the person is 23, $11,573.40 is saved.
5. Purchase Price
Thus, a person has $11,573.40 savings and $94,113.00 available from mortgage. Therefore, the maximum house can be purchased for:
$11,573.40 + $94,113.00 = $105,693.64
6. Find a Home
The suitable home is listed at $102,000 and it is located at 5343 N 22nd Ave # 2, Phoenix, AZ 85015. This is an apartment with 2 beds 2 baths and it is 1,128 sqft. The apartment was build in 1982, with the new roof , freshly painted (2014), new A/C. The features:
cooling: central, great solar potential;
parking: carport;
cable ready;
fireplace;
flooring: tile;
patio.
7. Total Payment of the House
The total payment was calculated in MS Excel, and it is $152,944.53. The total amount of interest is $62,525.17. The loan is paid in 334 months, which is 27 years and 10 days.
8. Loan If Sold in 5 Years and 10 Years.
If the house is sold:
in 5 years, a person owes $80,817.35;
in 10 years, a person owes $68,987.69.
9. Time when 20% Equity Paid
In 116 month, which is 9 years and 9 month, 20% of the house equity is paid. The remained loan is $69,855.42.
10. Additional $100 Monthly Payment
If additional $100 is paid every month, then the loan is paid in 239 month, which is 19 years and 11 month. Thus, 95 month of loan payment will be cut off. The total payment for the house is $133,222.24 ($42,802.88 as interest). $19,722.29 is saved on interest payment.
11. Additional $250 monthly payment
The additional $250 payment saves 165 payments. Totally, the payment is $119,761.11 ($29,341.75 as interest), and $33,183.42 is saved as interest.
12. 3 Years Regular Payment, then $200 Additional Payment
When the additional $200 payment is added after 3 years, 126 payments are saved. The loan is paid in 17 years and 4 months (208 months). The person saves $23,549.83 on interest.
13. Monthly Payment for 15-year Loan
The monthly payment was calculated using MS Excel table. Since the term was shortened twice, the first approximation was $900, and this appeared to be too much to cover the loan for 15 years. Then, $700 was used, and the loan was paid in 14 years and 4 month. Therefore, less payment is acceptable. The payment that allows loan payment for 15 years is $678.00.
The total amount paid for the apartment is $121,772.85 ($31,353.49 for interest).
