problem: Serah and James Bergholt are both government workers. They are considering buying a home in the Washington D.C. area for about $280,000. They estimate monthly costs for utilities at $220, maintenance at $100, property taxes at $360, & home insurance payments at $55. Their only debt consists of car loans requiring a monthly payment of $350.
Serah’s gross income is $55,000 per year and James’s is $38,000 per 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 percent down payment and closing costs. A lender is offering 30 year variable price loans with an initial interest rate of 8% given a 20% down payment & closing costs equal to $1,000 plus 3 points.
Before creating a purchase offer & applying for this loan, they would like to have some idea whether they might qualify. Determine the affordable mortgage and affordable purchase price for Bergholts.