Question

If a household is saving 35% of their total bi-weekly gross pay of $1,551.00, determine how many months it will take to save 20% for a down payment and 2.5% for closing costs for a property with a purchase price of $195,450.00.

1)25 months
2) 26 months
3) 37 months
4) 38 months

Answer 1

It will take approximately 37.38 months for the household to save for the 20% down payment and 2.5% closing costs for a property worth $195,450.00, which means the closest whole number month count is 37 months.

Step-by-step explanation:

To determine how many months it will take to save for a 20% down payment and 2.5% for closing costs for a property worth $195,450.00 when saving 35% of a bi-weekly gross pay of $1,551.00:

1. First, calculate the total savings needed: 20% of the purchase price for down payment plus 2.5% of the purchase price for closing costs equals 22.5% of $195,450.00, which is $43,976.25.
2. Next, calculate the bi-weekly savings amount: 35% of $1,551.00 is $542.85.
3. Then, determine the number of bi-weekly pay periods in a year: There are 52 weeks in a year, so 26 bi-weekly pay periods.
4. Now, calculate the annual savings: $542.85 times 26 equals $14,114.10.
5. Finally, divide the total savings needed by the annual savings to find out how many years it will take: $43,976.25 divided by $14,114.10 is approximately 3.115 years.
6. To find out how many months it will take, multiply the years by 12: 3.115 times 12 equals approximately 37.38 months.

The closest whole number solution to the available options is 37 months, making answer option 3 the correct choice.