Hector and Maria Gonzales Hector a Maria have been married for almost one year now and are thinking about buying a house. Maria is an executive for a large, multi−national corporation with offices around the world. She has been told by her company that she will be transferred to a new location every three years. Hector is a car salesman and he is willing to move to wherever Maria gets transferred. Together they make $8,000 in gross monthly income and pay 40% in taxes and withholdings every month. Between them they have monthly payment of $400 in student loans and $700 in car loans, and their credit cards payments average $450 per month. They currently lease a luxury condo for $1,400 per month. They travel to Cancun every Christmas. Since they both work a lot of hours, they eat out at restaurants for most meals. They currently have nothing in savings but Hector's grandparents have said they will give them a 20% down payment for the new home. Based on t

Question Completion:

They have found a very nice townhouse available for $200,000. Assuming a 20% down payment and a 30-year fixed rate mortgage at 6.65%, what will their PITI be? Annual property taxes are $2,400 and homeowner's insurance premium is $900 per year.

Hector and Maria Gonzales

Their PITI will be:

Mortgage Payment      $1,027.14

Property Tax                 $200.00

Home Insurance             $75.00

Total PITI =                   $1,302,14

NB: The rule states that Hector and Maria's PITI should not exceed 28% of their pre-tax monthly income.

Explanation:

a) Data and Calculations:

Home Price  = $200000

Down Payment = 20

%

Loan Term = 30  years

Interest Rate = 6.65

%  

Start Date = Jan  1, 2020

Annual Tax & Other Cost

s

Property Taxes = $2400

Home Insurance = $900

PMI Insurance = $0

HOA Fee = $0

Other Costs = $35400

b) Based on an online financial calculator:

Monthly Pay:   $1,027.14

                                   Monthly        Total

Mortgage Payment$1,027.14      $369,771.77

Property Tax                 $200.00      $72,000.00

Home Insurance           $75.00      $27,000.00

Other Costs             $2,950.00$1,062,000.00

Total Out-of-Pocket4,252.14   $1,530,771.77

House Price$200,000.00

Loan Amount$160,000.00

Down Payment$40,000.00

Total of 360 Mortgage Payments$369,771.77

Total Interest$209,771.77

Mortgage Payoff DateJan. 2050

c) The PITI is an acronym for principal, interest, taxes, and insurance—the sum components of a mortgage payment.  It helps Hector and Maria Gonzales to determine the affordability of this mortgage.  The Other Costs of $35,400  represent the annual costs of student and car loans, credit cards payments, and the condo, where they live.

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