1. HOME BUYING

2. How Much Can You Afford? Monthly payments – 28% of Gross Income Price of Home – 2-3 X Gross Income Gross Income – total income before taxes and other deductions are taken out

3. Home Buying Terms Down Payment – portion of purchase price that must be paid in cash – ideally 20% $100,000 x.20 = $20,000 Closing Costs – cash for fees at time of purchase

4. Home Buying Terms Amortization – gradual elimination of principal through a set number of monthly payments Term – length of amortization – (average is 30 years) (15-50 years)

5. Home Buying Terms Principal – the amount borrowed (purchase price – down payment) $100,000 - $20,000 = $80,000 Interest Rate – charge for borrowing money Currently 6-7% Mortgage Payment – monthly payment (principal, interest, taxes, insurance - PITI)

6. Home Buying Terms Total Cost of House – purchase price + amount of interest paid over the term of the mortgage Equity – selling price – remaining mortgage amount $120,000 - $80,000 = $40,000

7. Down Payment Calculation If the purchase price is $126,000 and the buyer has a 20% down payment, how much money will be needed? $126,000 x.2 = $25,200

8. Principal Calculation If the purchase price is $126,000 and the buyer supplies 20% ($25,200) down payment, how much principal must be borrowed? $126,000 - $25,200 = $100,800

9. Gross Income Calculation If your gross income is $50,000 per year what is your monthly gross income? $50,000 ~ 12 = $4,166 per month

10. Monthly Payment Calculation If your monthly gross income is $4,166, what is your approximate maximum monthly payment? $4,166 x.28 = $1166.76

11. Equity Calculation What is the equity if the selling price is $150,000 and the remaining mortgage amount is $100,000? $150,000 - $100,000 = $50,000

12. Construction Cost Calculation If construction costs are equal to approximately $100 per square foot, what is the approximate cost of a 1500 square foot house? $100 x 1500 = $150,000

13. Cost Per Square Foot Calculation What is the approximate cost per square foot of a 2000 square foot house if the selling price is $350,000? $350,000 ~ 2000 = $175 per square foot