Loan Project: Buying a House
For this assignment, you will apply some formulas for the situation when you take a loan from the bank to buy a house.
1. Find on internet on any Real Estate website house for sale you would like to buy.
• house description,
• price of the house
• picture of the house
2. Find online a current market interest rate for a 30-year fixed-rate mortgage having a down payment of 20 percent of the purchase price.
3. Compute
• the down payment (20% of the house price)
• amount financed and
• the monthly mortgage payment (M) for 30 years mortgage; use formula
M = pi/1-(1+i)-N
where P - loan taken from bank (mortgage), i - rate per month in decimal form, N - number of payments during 30 years (N=12x30=360)
4. Suppose rules of the bank are, that in order to qualify for the loan, your monthly mortgage payment cannot exceed 30% of your monthly income.
• What should be your minimum monthly income needed to qualify for the loan?
• What is the minimum annual income needed to qualify for the loan?
5. Assuming that the mortgage is held for the full 30 years (360 payments),
• compute the total amount you will pay for this house
• how much will be interest paid for your loan?