Buying a House
Introduction
You will be given three gross monthly incomes to buy three different houses based on your qualifying
purchase. Each scenario, you will have $200 in monthly debts you need to pay and 3% for a down
payment. Most young people have some monthly debt (student loans, credit cards, etc.)
Part I: Pre-qualification
Use the Pre-qualification Calculator web site and determine the price of a home that you can afford
for each of the three jobs with the gross monthly incomes given. Choose the state based on where
you wish to live after obtaining your first full-time job. You will calculate a 15 and 30-year mortgage
for each (you will decide which mortgage length you want to accept for each job). Do not change any
values in the pre-filled boxes.
Job #1 Job #2 Job #3
Gross Monthly $5,000 $8,000 $13,000
Income
Total Debt $200 $200 $200
Payment
Interest Rate % 5.75% 6.75% 5.75% 6.75% 5.75% 6.75%
Terms (years) 15 30 15 30 15 30
Down Payment 3% 3% 3% 3% 3% 3%
Amount you $210,123 $252,177 $348,405 $418,093 $578,914 $694,462
qualify for:
Part II: Shop for a House
Use Zillow to search for three homes using the three pre-qualification purchase prices you calculated.
Make sure you do not use rental property because you are buying a home. Fill in the table.
Process:
Choose a city to live in and click search.
Under Listing Type, click only For Sale: by agent, by owner, and new construction.
Under Any Price, put $0 as minimum and qualifying purchase price from table above as
maximum. You cannot purchase a home that is more expensive than your qualifying
purchase price!
Under Beds, choose 1+
Under Home Type, click only houses.
House #1 House #2 House #3
Afforded with Job #1 Afforded with Job #2 Afforded with Job #3
Qualifying $210,123 $418,093 $694,462
Purchase Price
(Choose one
price per job
1
from the table 15 30 30
above, either
the 15 or 30
year mortgage)
Total Price of $157,000 $418,000 $650,000
Home found on
Zillow
(must be under
Qualifying
Purchase Price
amount)
URL link to https://www.zillow.com/homedetails/ https://www.zillow.com/homedetails/ https://www.zillow.com/homedetails/
exact home for 5810-Fleming-St-UNIT-93-Everett- 11201-3rd-Ave-SE-UNIT-40A- 10025-13th-Ave-SE-40-Everett-WA-
sale WA-98203/443860986_zpid/ Everett-WA-98208/38562520_zpid/ 98208/444267415_zpid/
City & State Everett WA Everett WA Everett WA
Square 1152 sq. Ft. 1143 sq. Ft. 2113sq ft.
Footage
# of Bedrooms 2 3 3
# of Bathrooms 2 2 3
Year Built 1989 1980 2008
Now you will calculate your mortgage payment for each home using the previous link, the price of
each home, the length of the mortgage you chose based on your qualifying purchase price (15 or
30
years), down payment of $0, and the annual interest rate from the table
above
Monthly $1434 $1600 $4383
Mortgage
Payment
Monthly
Mortgage
Payment
divided by 28.6% 20% 33%
Monthly Gross
Income = %
On mortgage $227633 $883745 $1472187
calculator click
“Amortization
schedule”
Scroll all the
way to the
bottom of your
table.
What is the
total in
principal +
interest you
will pay for the
house over the
length of the
mortgage?
Hint: the total
will be “as of
2040” for 15
year and “as of
2055” for a 30
year mortgage.
2
Questions:
1) Which house and mortgage best fit your needs AND your budget (<30% Gross
Monthly Income)?
2) Do you need to make any adjustments to your home purchase to fit your budget? What
sacrifices might you need to make?
3) If you were to buy one of these houses, what changes would you make to the type of
mortgage, length of mortgage, interest rate, and down payment? (Give your reasoning/WHY
behind your changes)
4) Although you end up paying a lot in interest, how is paying interest on your
mortgage different/better than paying off debt on a credit card?
5) Based on our assignment about renting an apartment, write out at least three pros and
three cons for each and explain which one appeals more to you.
RENTING AN APARTMENT OWNING A HOME
PROS CONS PROS CONS
6) Which one appeals more to you? Why?
