finance math

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Problem 713#41

Affordability

Assume that you are a computer programmer for a company and that your gross pay is $72,000 per year. You are paid monthly and take home $4479.38 per month. You are considering purchasing a condominium and have looked at one you would like to buy. The purchase price is $134,000. The con-dominium development company will arrange financing for the purchase. A down payment of 20% of the selling price is required. The interest rate on the 30-year, fixed rate mortgage loan is 9%. The lender charges 2.5 points. The appraisal fee, title fee, and recording fee total $325. The property taxes on the condominium are currently $1152 per year.

The condominium management company charges a monthly maintenance fee for landscaping, trash removal, snow removal, maintenance on the buildings, management costs, and insurance on the property. The monthly fee is currently $120. This fee includes insurance on the buildings and land only, so you will need to purchase separate insurance coverage for your furniture and other personal possessions. You have talked to the insurance agent through whom you buy tenant homeowner’s insurance (to cover the personal possessions in your apartment), and you were told that such coverage will cost you approximately $192 per year.

The condominium uses electricity for cooking, heating, and lighting. You have been informed that the unit will use approximately 8750 kilowatt-hours per year. The cost of electricity is currently $.07 per kilo-watt-hour.

You have saved $36,000 in anticipation of buying a home, but you do not want your savings account balance to fall below $6000. (You want to have some funds to fall back on in case of an emergency.) You have $900 in your checking account, but you do not want your checking account balance to fall below $600.

a. Calculate the amount to be paid for the down payment and closing costs. Are you willing to take this much out of your accounts?

b. Determine the mortgage payment.

c. Calculate the total of the monthly payments related to ownership of the condominium (mortgage, maintenance fee, property tax, utilities,insurance).

d. Find the difference between your monthly take-home pay and the monthly expenses related to condominium ownership (part c). This figure indicates how much money is available to pay for all other expenses, including food, transportation, clothing, entertainment, dental bills, telephone bills, car bills, etc.

e. What percent of your monthly take-home pay are the condominium-related expenses (part c)? Round to the nearest tenth of a percent.

f. Do you think that, financially, you can handle the purchase of this condominium? Why

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