Final answer:
Victor's mortgage amount is $167,850. According to the affordability rule of thumb, he can afford the mortgage. His monthly mortgage payment will be $775.42, and the total payment for the house will be $279,150.72. The amount of interest that Victor will pay is $111,300.72.
Step-by-step explanation:
To answer the question, we need to calculate the mortgage amount, monthly mortgage payment, total payment for the house, and the amount of interest Victor will pay.
(a) Mortgage amount:
Victor is making a 10% down payment on the home, so the mortgage amount he will borrow is 90% of the home price: 0.90 × $185,500 = $167,850.
(b) Affordability:
A rule of thumb for affordability is that the monthly mortgage payment should not exceed 25% to 30% of the monthly gross income. We can calculate Victor's monthly gross income by dividing his annual income by 12: $84,482 / 12 = $7,040.16. Let's calculate the monthly mortgage payment:
Using the interest rate of 3.75% and the loan term of 30 years, we find the monthly mortgage payment per $1000 borrowed from the given table: $4.631.
To calculate the monthly mortgage payment for Victor's loan, we multiply the monthly mortgage payment per $1000 borrowed by the mortgage amount in thousands: $4.631 × ($167,850 / 1000) = $775.42.
Now we can check if this payment is within the affordability range: $775.42 / $7,040.16 = 0.1100 (or 11.00%). Since this percentage is below 25% to 30%, Victor can afford this mortgage.
(c) Monthly mortgage payment:
As calculated above, Victor's monthly mortgage payment will be $775.42.
(d) Total payment for the house:
To calculate the total payment, we multiply the monthly mortgage payment by the number of months in the loan term: $775.42 × (30 years × 12 months/year) = $279,150.72.
(e) Amount of interest:
The amount of interest Victor will pay can be calculated by subtracting the mortgage amount from the total payment for the house: $279,150.72 - $167,850 = $111,300.72.