Lease versus Purchase Decision Cost of Purchasing

Lease versus Purchase Decision Cost of Purchasing
June 29, 2019
The Allen Corporation
June 29, 2019
W11WORKSHEETWorksheet for Calculating the Maximum Monthly Mortgage Payment and Mortgage Size for Which You Can Qualify
 Method 1 Determine Your Maximum Monthly Mortgage Payment Using the 
 Ability to Pay, PITI Ratio.    
 a.Monthly income (annual income divided by 12)  
 b.Times 0.28: Percentage of PITI (Principal, interest, taxes, and insurance) to your 
 monthly gross income that lenders will lend in the form of a mortgage loan 
 (multiply line a by 0.28)x 0.28=$0 
 c.Less: Estimated monthly real estate tax and insurance payments  
 d.Equals: Your maximum monthly mortgage payment using the 28% of PITI ratio=$0 
 To Determine the Maximum Mortgage Loan Level Using the Maximum Monthly 
 Mortgage Payments as Determined Using the PITI Ratio (line d): 
 Step 1: Monthly mortgage payment for a $10,000 mortgage with a ____ year 
 maturity and a ____% interest rate (using Table 8.1)=  
 Step 2: Maximum mortgage level = maximum monthly mortgage payment (line d) 
 divided by the monthly mortgage payment on a $10,000, ____%, ____year 
 mortgage (step 1 above) times $10,000 = (line d/step 1) x $10,000=  
  
 Method 2 Determine Your Maximum Monthly Mortgage Payment Using the 
 Ability to Pay, PITI Plus oth Fixed Monthly Payments, Ratio.    
 e.Monthly income (annual income divided by 12)  
 f.Times 0.36: Percentage of PITI + current monthly fixed payments to your 
 monthly gross income that lenders will lend in the form of a mortgage loan 
 (multiply line a by 0.36)x 0.36=$0 
 g.Less: Current nonmortgage debt payments on debt that will take over 
 10 months to pay off and other monhtly legal obligations such as child support 
 and allimony payments  
 h.Less: Estimated monthly real estate tax and insurance payments  
 i.Equals: Your maximum monthly mortgage payment using the 36% of PITI + other fixed 
 Monthly payments ratio (line f  – g – h)=$0 
 To Determine the Maximum Mortgage Loan Using the PITI Plus Other Fixed Monthly 
 Payments Ratio (line i): 
 Step 1: Monthly mortgage payment for a $10,000 mortgage with a ____ year 
 maturity and a ____% interest rate (using Table 8.1)=  
 Step 2: Maximum mortgage level = maximum monthly mortgage payment (line d) 
 divided by the monthly mortgage payment on a $10,000, ____%, ____year 
 mortgage (step 1 above) times $10,000 = (line i/step 1) x $10,000=  
  
 Method 3 Determine Your Maximum Mortgage Level Using the “80% of the 
 Appraised Value of the House” Rule.    
 j.Funds availble for the down payment and closing costs  
 k.Less: Closing costs  
 l.Equals: Funds available for the down payment=$0 
 m.Times 4: Maximum mortgage level using the “80% of the appraised value of the 
 house” rule (the 20% down, line l, times 4 equals the 80% you can borrow)x 4=$0 
  
 Conclusion: Maximum Mortgage Level for Which You Will Qualify 
 (the lowest of the amounts using method 1, method 2, or method 3) =  
 
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