HYPERLINK "https://mycampus.aiu-online.com/Classroom/" Noorani, Kim
HYPERLINK "https://mycampus.aiu-online.com/Classroom/" Robles,
Angela HYPERLINK "https://mycampus.aiu-online.com/Classroom/"
Sesay, Franklin HYPERLINK
"https://mycampus.aiu-online.com/Classroom/" Sills, Lori HYPERLINK
"https://mycampus.aiu-online.com/Classroom/" Williams, Tonya
Deliverable Length: 2-3 pages
Details: Complete the following exercise in your groups:
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.
Estimate the affordable mortgage and the affordable purchase price for
the Bergholts.
Suppose they do qualify; what other factors might they consider before
purchasing and taking out a home mortgage?
What future changes might present problems for the Bergholts?
The real estate agent tells the Bergholts that if they don't care to
purchase, they might consider renting. The rental option would cost
$1,400/month plus utilities estimated at $220 and renter's insurance of
$25/month. The Bergholts believe that neither of them is likely to be
transferred to another location within the next five years. After that,
Dan perceives that he might move out of government service into the
private sector. Assuming they remain in the same place for the next five
years, the Bergholts would like to know if it is better to buy or rent
the home. They expect that the price of housing and rents will rise at
an annual rate of 3% over the next five years. They expect to earn an
annual rate of 5% on the money market fund. All other prices, including
utilities, maintenance, and taxes are expected to increase at a 3%
annual rate. After federal, state, and local taxes, they get to keep
only 55% of a marginal dollar of earnings.
Estimate whether it is financially more attractive for the Bergholts to
rent or to purchase the home over a five-year holding period. (Assuming
the contract interest rate of 8%, monthly interest payments over the
five-year period would total $87,574.)
Suppose it turns out that they have to relocate after one year. Which is
the preferred alternative after one year? (Interest payments over the
first year would equal $17,852.)
Psychology Homework Solutions
#113641
Real Estate Acquisition Scenario
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.
1.Estimate the affordable mortgage and the affordable purchase price for the Bergholts.
2.Suppose they do qualify; what other factors might they consider before purchasing and taking out a home mortgage?
3.What future changes might present problems for the Bergholts?
The real estate agent tells the Bergholts that if they don't care to purchase, they might consider renting. The rental option would cost $1,400/month plus utilities estimated at $220 and renter's insurance of $25/month. The Bergholts believe that neither of them is likely to be transferred to another location within the next five years. After that, Dan perceives that he might move out of government service into the private sector. Assuming they remain in the same place for the next five years, the Bergholts would like to know if it is better to buy or rent the home. They expect that the price of housing and rents will rise at an annual rate of 3% over the next five years. They expect to earn an annual rate of 5% on the money market fund. All other prices, including utilities, maintenance, and taxes are expected to increase at a 3% annual rate. After federal, state, and local taxes, they get to keep only 55% of a marginal dollar of earnings.
4.Estimate whether it is financially more attractive for the Bergholts to rent or to purchase the home over a five-year holding period. (Assuming the contract interest rate of 8%, monthly interest payments over the five-year period would total $87,574.)
5.Suppose it turns out that they have to relocate after one year. Which is the preferred alternative after one year? (Interest payments over the first year would equal $17,852.)
For the right real estate selection for Kim and Dan Bergholt, we will have to make some calculations and then reach to the best option. This posting details the steps needed to make the decision.
What is this?
By OTA - Overall OTA Rating
Departed OTA
Purchase Cost Now
$2.19 CAD (was ~$51.87)
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