The President of the United States makes $400,000 annually. While still in office, the president's family has decided to purchase a home that has an estimated
property tax of $50,000 and home insurance of $15,000 annually. Let's assume that the president's family has no loans or debt, and they have saved a 35,000
down payment.
What monthly mortgage payment can the president's family afford? (Hint: use the Total Expense Ratio as presented on the "Explore" page in section 11 of your
course materials packet). Round your answer to the nearest cent

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itzamirv2 itzamirv2 · Answer 1 · 2024-02-24T23:59:13+01:00

Given:

- Annual salary of the President = $400,000

- Property tax = $50,000 annually

- Home insurance = $15,000 annually

- Down payment = $35,000

First, let's calculate the total monthly housing expenses:

Total Monthly Housing Expenses = Monthly Mortgage Payment + (Property Tax / 12) + (Home Insurance / 12)

Total Monthly Housing Expenses = Monthly Mortgage Payment + ($50,000 / 12) + ($15,000 / 12)

Total Monthly Housing Expenses = Monthly Mortgage Payment + $4,166.67 + $1,250

Total Monthly Housing Expenses = Monthly Mortgage Payment + $5,416.67

Now, let's calculate the Monthly Gross Income:

Monthly Gross Income = Annual Salary / 12

Monthly Gross Income = $400,000 / 12

Monthly Gross Income = $33,333.33

Now, using the Total Expense Ratio (TER) of 28%, we'll find the Monthly Mortgage Payment:

Monthly Mortgage Payment = TER * Monthly Gross Income - $5,416.67

Monthly Mortgage Payment = 0.28 * $33,333.33 - $5,416.67

Monthly Mortgage Payment = $9,333.3324 - $5,416.67

Monthly Mortgage Payment ≈ $3,916.66

So, the president's family can afford a monthly mortgage payment of approximately $3,916.66.