Shelby and Mark Lawrence were married a year ago and are planning to purchase a condo as their first home together. Rent for a two-bedroom apartment costs them around $800. They want to stay as close to this amount as possible since they are preparing to open Shelby's pet salon within the next year. They need help in evaluating all of the elements of home ownership.
Life situation: Young married couple, Shelby, age 26; Mark, age 27.
Financial data:
Monthly gross income = $3,600
Living expenses = 3,100
Assets = 25,000
Liabilities = 3,000
Questions:
Let’s assume the Lawrence’s will qualify for a 6%, 30-year loan and will make a down payment of 10%. They are currently paying $300 on a used car auto loan for Shelby and will pay $220 per month for property taxes and homeowners insurance. Using the “Housing affordability and mortgage qualification amounts” exhibit within the chapter, calculate the following:
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The amount of their affordable monthly mortgage payment
Monthly Gross Income =
Down Payment =
Amount of their affordable monthly mortgage payment
the amount of their affordable mortgage loan amount
The amount they can afford to pay for a home
What are the tax advantages for the Lawrence’s of owning a home rather than renting?
Shelby and Mark Lawrence have the tax advantage of deducting interest paid on a mortgage from the income tax. According to Vasel (2018), homeowners have the leverage to eternize interests on mortgages.
Additionally, the Lawrence’s can acquire a loan against the equity in their home (Whiting, 2018).
Explain how Shelby and Cameron might use the following Personal Financial Planner sheets when deciding to purchase a home.
Renting versus Buying Housing planner will allow them to compare the financial aspects of renting and buying their housing.
If the Lawrence’s are undecided whether to rent or buy a house, they can use the buying or renting sheet as a reference. The reference sheet helps them compare the cost associated with purchasing the place of residence or renting a house. By listing the expenses related to renting and buying, Shelby and Mark can compare the costs as well as make an appropriate decision on whether to buy or rent.
Housing Affordability and Mortgage Qualification planner will help them determine the amount they can afford for buying a home and obtaining a mortgage.
Mark and Shelby can also utilize the Housing Affordability and Mortgage Qualification Planner to obtain an estimate of the mortgage amount, amount of affordable mortgage payment as well as home purchase price. By following the processes as well as the instructions in the sheet, the Lawrence’s can obtain the estimates of all of the above which can aid in their decision making.
References
Vasel, K. (2018). Renting VS. Buying: What Can You Afford. [Online]. Available at: https://money.cnn.com/2018/03/01/pf/renting-vs-buying-what-to-do/index.html . Accessed 8 th Oct 2018.
Whiting, J. (2018). Equity Loans Lose Tax Advantages But Still Have a Role for Homeowners. [Online]. Available at: https://www.askalender.com/advice/equity-loans-lose-tax-advantages-but-still-have-a-role-for-homeowners/ . Accessed 8 th Oct 2018.
