Question

Pat is saving $425 per month for a down payment on her first house. The house she wants sells for $95,000 and the lender requires 5% down. How long will Pat have to save before she has enough for the down payment?

12 months

Answer 1

Pat will need to save for 12 months before she has enough for the down payment.

Step-by-step explanation:

To calculate how long Pat will need to save before she has enough for the down payment, we need to determine the amount of the down payment and divide it by her monthly savings.

The house she wants sells for $95,000 and the lender requires a 5% down payment. So the down payment amount is 5% of $95,000 which is $4,750.

Now we divide the down payment amount by her monthly savings of $425: $4,750 ÷ $425 = 11.176.

Since we can't have a fraction of a month, we need to round up to the nearest whole month. Therefore, Pat will need to save for 12 months before she has enough for the down payment.

Answer 2

Pat would have to save for 118 months or approximately 9.8 years for her to be able to buy the house that she wants at $95,000. The computation are as follows:

$95,000 X 0.5 (% on 1st down payment) = $47,500
$95,000 - $47,500 = $50,000 (Pat's 1st down payment)

To compute for how long she could save for $50,000:
$50,000 / $425 = 117.64 or 118 months