  # College Math - Affordable Home Purchase Price

by April Dickey
(Ardmore, OK, USA)

Affordable Home Purchase Price

• Assume you can afford a down payment equal to 25% of your yearly income.

1. What is the total purchase price can you afford for a home?

2. Would this amount allow you to purchase a home in the area where you live?

Using 7% interest rate on a 25 year loan I get:

7.70x = 560

x = 181.818

181.818 * 1000 = \$181,818

now we must add in my down payment 25% of my yearly income is:

.25 * 24,000 = \$6,000

\$181,818 + 6,000 = \$187,818

Is this right or did I do it wrong?

### Comments for College Math - Affordable Home Purchase Price

 Aug 14, 2012 Home Purchase Price by: Staff Answer: The procedures you used are correct. However, the solution for x in the equation 7.70x = 560 is not correct. Generally, your monthly mortgage payments should be no more than 28% of your monthly income. Your annual income is \$24,000. Your monthly income = \$24,000 ÷ 12 months = \$2,000 per month Your monthly mortgage payments should be no more than: .28 * \$2,000 = \$560 per month Up to this point the numbers you used are correct. The following equation is also correct: 7.70x = 560 However, the next step in your calculations is incorrect. 7.70x = 560, OK x ≠ 181.818, x does not equal 181.818 - ERROR to solve for x, divide each side of the equation by 7.70 7.70x = 560 7.70x / 7.70 = 560 / 7.70 x * (7.70 / 7.70) = 560 / 7.70 x * (1) = 560 / 7.70 x = 560 / 7.70 x = 72.7273 You can afford a mortgage of 72.7273*1000 = \$72,727.30 Your down payment is calculated correctly: Down payment = .25 * 24,000 = \$6,000 Add the down payment of \$6,000 to your mortgage \$72,727.30 + \$6,000 = \$78,727.30 Can purchase a home costing about \$78,727 Thanks for writing. Staff www.solving-math-problems.com