Susan Summers wants to buy a house for $320,000 in 5 years. She wants to put 20% down and apply for 30-year fixed mortgage to finance the rest. Mortgage interest rate is 4%, annual property tax is 0. 9% of house value and homeowners insurance is $100 per month. Assume expected rate of return on her savings is 2%. Expected inflation rate is 3%.
1. Calculate monthly mortgage payment.
2. Calculate housing expenses (front-end) ratio.
3. Calculate total debt-to-income (back-end) ratio.
4. Based on your calculation, can she afford the $320,000 house?
5. Calculate how much she needs to set aside every month to save enough for down payment in 5 years.
6. Calculate how long it takes to save enough for down payments if she saves $200 each month?