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Duane Miller wants to know what price home he can afford. His annual gross income is $60,000. He has no other debt expenses and expects property taxes and insurance to cost $500 per month. He knows he can get a 6%, 15 year mortgage so his mortgage payment factor is 8.43. He expects to make a 10% down payment. What is Duane's affordable home purchase price

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Answer: $151,576

Explanation:

Affordable home purchase price = Affordable mortgage loan / (1 - Down payment percentage)

       Affordable mortgage loan = Affordable monthly payment * 1,000 / Factor

             Affordable monthly payment = Monthly income * 33% - Property taxes

             = (60,000 / 12) * 33% - 500

             = $1,150

       Affordable mortgage loan = 1,150 * 1,000 / 8.43

       = $136,418

Affordable home purchase price = 136,418 / ( 1 - 10%)

= $151,576

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