Home Mortgage: Front-end ratio: The ratio of the total monthly house payment to gross monthly income. (payment/income) Back-end ratio: The ratio of the total monthly debt payment to gross monthly income. (payment +all credit cards payments + auto loan payments + student loan payments/income) Credit score: Calculated by national credit bureaus Factors that impact a credit score: 1. payment history/unresolved collections 2. excessive lines of credit 3. balances
Factors for loan qualification: Front-end ratio should not exceed 28% Back-end ratio should not exceed 36% Credit score should be 650 or higher
You make $30,000 per year. You have a car loan of $150.00 and a student loan of $100.00. You have $3,000 in the bank for a down payment. Right now you are paying $600 a month for rent. Can you afford to buy a house with a house payment of $600 per month?
Figure the front end ratio (use your rent payment as house payment) :
Figure the back end ratio (use your rent payment as house payment):
Go to www.realtor.com . Click on Mortgage link and choose home affordability. Enter your data from above in the Home Affordability calculator. (Be sure that you do not include your rent payment in your monthly debt.)
What are your results?
Try the following down payments and enter your results
Down payment 5,000
Down payment 10,000
Go to College Cost Projector http://www.finaid.org/calculators/costprojector.phtml
Pretend you are a new parent wanting to save for your child’s education. In 18 years the baby will enter school. Right now to attend Pima it costs around $1,400 a year. Use the calculator to figure how much you will have to save. Amount: _________________
To attend the U of A the cost is around $17,000 a year for tuition and books. Figure out how much you would have to save. Amount: _____________
Go to Savings Growth Projector. http://www.finaid.org/calculators/savingsgrowth.phtml
Use the calculator to figure out how much you need to save every month to save enough to put the baby through college. (see…