BuyingaHouseand

PayingforIt
Math1050Project2
SulianaFauonuku

In this project, we will examine the process of buying a house. We will look at important
considerations when selecting mortgage (mortgage is a fancy word for a home loan).
We will also look at possible ways to save money on your mortgage.

PART I: Finding a House, Loan Amount, and Interest Rates

1. Select a house from a newspaper, real estate booklet, or a website. Be realistic
about your selection. Choose a house that is in a reasonable price range.
(Minimum of $100,000 and maximum of $500,000)
Attach a picture and
description of the house to the end of this project.
2. Assume you will pay the asking price for the home. Put the asking price here:
$493,000
3. Most mortgages require a significant down payment. TO get the best rate and
payment on a mortgage you will typically need to put 20% down. You will then
get a mortgage loan for the other 80%. Calculate your down payment and
mortgage loan amount and list them below.
Down Payment:
$98,600

Mortgage Amount:
#393,400

There are many different types of mortgages. Most people work with a loan
officer to figure out what type of mortgage fits their needs. Many people even decide
what type of mortgage they need
before
they start looking for a house. To keep this
project fairly simple, well assume that youre assume that youre going to compare a 30
year fixed rate mortgage and a 15 year fixed rate mortgage.
Credit scores
(also called
FICO scores
) are extremely important when obtaining any loan. You should do
everything you can to have a good credit score. (You may want to do an internet search
to find out how credit scores are determined and what you can do to make sure you
have high FICO scores.)
4. Contact aa lending institution (a broker, a bank, or a credit union), tell them youre
doing a project for school and that you need to get
the interest rate on a 30 year

and a 15 year fixed rate mortgage

. TEll them
youre putting 20% down
, what your
loan amount is, and that
you have a 750 FICO score
. Record the rates below.
30 Year Interest Rate (750 FICO):
3.875%

15 Year Interest Rate (750 FOCP):

2.875%

PART II: 30 Year Mortgage

5. Calculate the monthly payment for a 30 year mortgage using the following
formula.
Round the payment to the NEAREST cent. Be sure to show your work.
[PMT is the monthly loan payment,
P
, is the
Principal Balance
of the mortgage (ie. loan
amount),
r
is the annual percent rate for the loan as a decimal, and
Y
is the number of
years to pay off the loan.]
P M T = P(r/12)/1-(1+r/12)^-12y
SHOW WORK HERE:
PMT= P(0.3875/12)/1-(1+0.3875/12)^-12(30)
PMT= P(0.0032)/(0.0032)^-360
*online calculator

Monthly Payment for a 30 year mortgage=

$1,854.62

*Please note that this monthly payment covers only the principal and the interest on the
loan. I does not cover any taxes, insurance, or homeowners association (HOA) fees on
the property*
When determining what type of loan you need, it can be helpful to understand how your
payment is applied each month. An
Amortization Schedule
can help you understand
your loan better. An amortization schedule summarizes and what the unpaid balance of
the loan is at any given time. You may download an Excel template of an amortization
schedule at the following MicroSoft address:
bretwhissel.net/cyi-bin/amortize
You can use this amortization schedule on any standard loan. (
It will even work for a car
loan
. You may want to save this spreadsheet for future use.) Open the spreadsheet and

enter the information requested regarding your 30 year loan. Use the first day of next
month as the start date of the loan.
6. List the following information from the amortization schedule:
a. Payment Amount:

$
1,854.62

(This should agree with what you computed in part 5.)

b. Total Interest Paid Over 30 Years:

$
273,261.42

(This might be called Cumulative Interest.)

c. Total Amount Repaid:

$
667,661.42

(This schedule may not give you this number. There are two ways to figure out how
much you paid over the life of the loan. Think for a minute and you can figure one of
them out.)
7. Notice that the amount of the payment that goes towards the principal and the
amount that goes towards the interest does not stay the same for every
payment. Explain what you observe about these values and why they change the
way they do.
The amount paid to the principal is not the same as the amount paid to the interest
because the majority of the payments is for the principal value. Interest is extra money
having to be paid, not paid by increasing payment amounts.
8. Find the number of the first payment when more of the payment goes toward
principal than interest.
Pmt. No.
147
9. As previously mentioned, these payments are for principal and interest only. You
will also have to pay monthly for home insurance and property taxes. In addition,
it is helpful to have money left over for luxuries like electricity, heat, running
water, and food. As a wise home, you decide that your monthly principal and

interest payment should not exceed 35% of your monthly take-home pay. What
minimum monthly take-home pay should you have in order to meet this goal?
Show your work
for making this calculation.
.35($5300) = $1855 > $1854.62
.35($5299) = $1854.65 > $1854.62 ; $3,444.38 left
SHOW WORK HERE:
Minimum Monthly Take-Home Pay: $
5,299
10. It is also important to keep in mind that your net or take-home pay (after taxes)
is less than your gross pay (before taxes). Assuming that your net pay is 75% of
your gross pay, what minimum gross monthly salary will you need to make to
have the monthly net salary stated above?
Show your work
for making this
calculation.
SHOW WORK HERE:
net= $5299
.75(10000)= $5250 < $5299
.75(7066)= $5299.50 > $5299
.75(7100)= $5325 > $5299
Minimum
Monthly
Gross Salary: $
7,066
11. Now compute the required Minimum Gross
Annual
Salary:

$
84,792

$7066(12)

PART III: 15 year Mortgage

12. Calculate the monthly payment for a 15 year mortgage using the formula on page
one.
Round the payment to the NEAREST cent
. Be sure to
show your work
.
SHOW WORK HERE:
PMT = P(0.02875/12)/1-(1+0.02875/12)^-12(15)
PMT= P(0.0024)/(0.0024)6-180

*online calculator
Monthly Payment for 15 year mortgage = $
2,700.01
13. List the following information from the amortization schedule:
a. Payment Amount
:

$
2,700.01

(This should agree with what you computed in part 12.)

b. Total Interest Paid Over 15 Years:

$
91,601.09

(This might be called Cumulative Interest)

c. Total Amount Repaid:

$
486,001.80

(The schedule will not give you this number. See if you can figure out both ways
to compute this.)
14. Find the number of the first payment when more of the payment goes toward
principal than interest.
Pmt. No.
_1_
15. Over the life of the loan, how much money do you save by having a 15 year
mortgage versus a 30 year mortgage?
Total Savings: $
181,659.62
16. If you saved a significant amount of money, why do you think most people get a
30 year mortgage instead of a 15 year mortgage?
30 years provides a longer set duration of time to make payments. Also, because the
monthly payment ($1,854.62) of a 30 yr. is lower than the mo. payment ($2,700.01) of a
15 year mortgage. People tend to choose the plan with a lower monthly pay and more
time to pay it off, thinking its the better deal.

Part IV: IMPORTANCE OF HAVING A GOOD CREDIT SCORE

17. Contact a lending institution with the same information you did the first time with
two exceptions. Tell them you have a
620 FICO and youre only interested in a 30
year fixed rate mortgage.
30 Year Interest Rate (620 FICO)

4.25%

18. Then complete the amortization schedule with the new rate. Record the total
interest paid below.
Total Interest Paid over 30 years: $
304,075.93
19. Compare the total interest paid the same loan with a 750 FICO versus a 620
FICO. How much would a high FICO save on your loan?
High FICO savings: $
30,814,51

Part IV: Extra Principal Payments

20. Suppose you paid an additional $100 towards the principal each month on the
30
year mortgage
discussed in Part II. The spreadsheet has a place to enter extra
principal payments. Enter $100 on this line and answer the following:
a. How long would it take to pay off the loan with this additional payment?
i.

28 years

b. What is the total amount of interest paid over the life of the loan?
i.

$
244,821.91

c. What is the total amount repaid over the life of the loan?
i.

$
639,221.91

21. Compare the amount in 20 part c with the total amount repaid without any extra
payments in Problem 6 part c. How much would you save if you made the extra
$100 per month in principal payments?
$
28,439.51

Part V: Reflection
22. Write a half-page, we written, typed paper describing what you learned by doing
this project and your feelings about buying a house. You may address issues
such as: Did this project change the way you think about buying a home? Does
the career youre interested in provide the salary you need to have the house you
want? How will you save for the down payment? How important is a good credit
score?
[At top of eportfolio page titled Resume]

Part VI: BONUS

Suppose you buy a car for $13,500 and you get a zero down loan at 5.9% interest for 5
years.
23. What is your monthly payment?

$
260.37

24. How much interest will you pay over the life of the loan?

$
1,457.57

25. What is the total cost of the car?

$
15,622.20

Home For Sale Active

$489,000

4813 Lakewood Dr
Colleyville, TX 76034
4 beds
2 full , 1 half baths
3,348 sq ft
8,625 sq ft lot
Presented by Nanette Ecklund-Luker Group
Brokered by Briggs Freeman Sotheby's Int'l

Property Details
Overview
Absolutely beautiful, well-maintained home in sought-after, gated Lakewood Estates offers
exceptional floor plan & abundant storage. Stunning hardwood floors-minimal carpet-1st
floor. Large kitchen w- separate moms office, gas cooktop, granite counters, loads of
cabinetry opens to lovely living area. Master down. Study, bonus room & sitting area at
staircase landing. Decorator touch throughout. Low maintenance backyard & spacious
covered porch.
Key Facts
Style:
Traditional
Single family home
Year built: 1999
Price/Sq Ft: $146
50 days on realtor.com
Status: Active
http://www.realtor.com/realestateandhomes-detail/4813-Lakewood-Dr_Colleyville_TX_76034_M82325-29080#/photo1

Features
Bedrooms
Beds Total: 4
Bathrooms
Full Bathrooms: 2
Half Bathrooms: 1
Kitchen and Dining
Number Of Dining Areas: 2
Interior Features
Cable Tv Available
Decorative Lighting
High Speed Internet Available
Sound System Wiring
Window Coverings
Burglar Security
Leased Security
Monitored Security
Pre-Wired Security
Smoke Detector Security
Security System
Building and Construction
Architectural Style: Traditional
Single Detached
Carpet Flooring
Ceramic Tile Flooring
Wood Flooring
Number Of Stories: 2
Year Built Details: Preowned

 Room Count: 15
Brick Construction
Slab Foundation
Composition Roof
Energy Saving Attic Fan
Energy Saving Ceiling Fans
Energy Saving Gas Water Heater
Energy Saving Programmable Thermostat
Number Of Living Areas: 4
Exterior and Lot Features
Covered Porch(Es)
Gutters
Sprinkler System
Landscaped
Some Trees
Subdivision
Fencing: Brick
Fencing: Wood
Appliances
Built-in Microwave
Cooktop - Gas
Dishwasher
Disposal
Double Oven
Oven-Electric
Plumbed For Gas in Kitchen
Vent Mechanism
Water Line to Refrigerator
Amenities and Community Features
Gated Entrance
Perimeter Fencing
Private Lake/Pond
Land Info
Lot Size Area: 0.198
Lot Size Units: Acres
Lot Size: Less Than .5 Acre (not Zero)

Property History
Property Price
Date

Event

Price

Price/Sq Ft

Source

03/24/2016

Price Changed

$489,000

$146

NTREIS

02/23/2016

Listed

$493,000

$147

NTREIS

Property Tax
Year
Taxes

Land

Additions

2015

$9,985

Price Unavailable

2014

$9,077

$60,000

2013

$9,077

$60,000

N/A

Total Assessment
=

$430,870

$331,700 =

$391,700

$331,700 =

$391,700

Formatted for easy printing so you can take this with you. Remember to say you found it
on realtor.com.
This information has been secured from sources we believe to be reliable, but we make
no representations or warranties, expressed or implied, as to the accuracy of the
information. You must verify the information and bear all risk for inaccuracies.
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