Estimate the affordable mortgage and the affordable purchase price for the Bergholts? Please help if you can.
Kim and Dan Bergholt are both government workers. They are considering purchasing a home in the Washington D.C. area for about $ 280,000. They estimate monthly expenses for utilities at $ 220, maintenance at $ 100, property taxes at $ 380, and home insurance payments at $ 50. Their only debt consists of car loans requiring a monthly payment of $ 350.
Kim’s gross income is $ 55,000/year and Dan’s is $ 38,000/year. They have saved about $ 60,000 in a money market fund on which they earned $ 5,840 last year. They plan to use most of this for a 20% down payment and closing costs. A lender is offering 30-year variable rate loans with an initial interest rate of 8% given a 20% down payment and closing costs equal to $ 1,000 plus 3 points. Before making a purchase offer and applying for this loan, they would like to have some idea whether they might qualify.