Question

Upon graduating from UCI, you start a job in finance earning $72,000 per year and decide to buy a home. You can afford to pay no more than $1,000 per month for the fixed monthly payments on a 30-year fixed-rate home loan (mortgage) and the current conventional 30-year fixed mortgage annual interest rate that you qualify to borrow at is 4%. What is the maximum size home loan you can afford? Please round your numerical answer to the nearest dollar.

Answer 1

Maximum size of home loan than can afford is $209,471

Step-by-step explanation:

Rate of interest on borrowing = 4%

Per month rate (r) = 4% / 12 = 0.33%

n = 30*12 = 360 months

Maximum size of home loan than can afford =

= $1000 * PVAF (0.33% , 360)

= $1000 * 209.47135

= $209471.35

= $209,471

Maximum size of home loan than can afford = $209471

Note: Monthly payment * PVAF( r, n)

PVAF at (0.33% , 360)

PVAF = 209.47135