Add your results to your Family Budget Presentation AND your Google Sheets
It's time to buy your "castle". Buying a house is possibly the most expensive purchase of your life. It is important to tackle this purchase with your eyes open. Just because a bank thinks you can afford a multimillion-dollar house doesn’t mean it’s a wise financial choice.
Before you sign on the dotted line, consider the stress level involved with making a high mortgage payment every month. The bank wants to make money on you, and they will set the bar as high as they want to risk—which may be more than you want to risk. Be proactive and carefully evaluate what you can pay to live within your means.
Information will go on your Family Budget Presentation AND Google Budget Sheet.
- Find a place to live. Some places you can look are:
http://www.trulia.com/
http://www.century21.com/
http://www.realtor.com/
http://www.coldwellbanker.com/
- Take a screenshot that includes a picture of the house and the basic information including the MLS ID number and property taxes. Note: The MLS ID number is like a home social security number.
- If you cannot find the property taxes for your house, use Google and the MLS # to find the house on another real estate Web site.
- Calculating the cost of the House – You must show all calculations like my example here. Few people make an offer on a house at the selling price. You are able to haggle the price of the house down 4%. (A $200,000 home would cost you $192,000.) Use the Family Budget Presentation to record the information on your house.
$200,000 x .04 = 8,000
$200,000 - $8,000 = $192,000
- Fortunately, you have saved up enough money to put 10% down on the mortgage.
$192,000 x .10 = $19,200
$192,000 - $19,200 = $172,800 = principal for your mortgage loan
Note: The principal is the amount you will need to borrow from a bank.
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Luckily, the current mortgage rates are reasonable. Because you paid attention in your economics class, you know the importance of a good credit score, and you have a fairly good one at 740. As a result of having a good credit score, you qualify for a 3.5% mortgage rate. The average mortgage lasts 30 years or 360 months.
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Go to the following website:http://www.thecalculatorsite.com/finance/calculators/mortgagecalculator.php
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Put in the principal and change the interest rate accordingly. Leave the balloon payment and payment amount blank. Click calculate.
- Take a screenshot of the calculated summary. Add this information to your Family Budget Presentation. Be sure to include where the house is located.
NOTE: Some budget experts recommend that a house monthly payment should be no more than 28% of your gross monthly income. For this project, you must follow this 28% rule. You may have to find a cheaper house.
Example: If your monthly gross pay is $5,866.67, twenty-eight percent of that number is $1,642.67.
5,866.67 x .28 = 1,642.67
Therefore: your monthly mortgage payment must be less than 1,642.67 of if your monthly gross pay is $5,866.67.
If you have followed the 28% rule, enter the regular payment amount in the mortgage section of your Family Budget Project document. Also enter your property taxes. Remember, the amount listed on the real estate website is for the year. Consequently, you must divide your taxes by 12 months and record that monthly payment amount.
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