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Yearly Salary: $80,000 Home Cost: $150,000 Property Tax Rate: 0.87% Annual Home Insurance cost: $1042

Assume that you are currently employed. You expect a 5 percent annual increases in alary. Assume also that all your taxes and deductions place you on a flat 25 percent flat tax rate. Your plan is to buy your first house five years from now at a projected price of one and half times your annual salary at the time of purchase. You start your now to set aside 0 every month in an account that will earn 3 percent nominal rate annually in order to accumulate enough money for a reasonable down payment. You have been pre-approved for a 5-year, 4 percent conventional mortgage loan (based on the estimates of your income and everyday expenses which include the house purchase and other consequential expenses, ie mortgage payment, mortgage insurance, property taxes) provided that your debt ratio does not exceed 30 percent at the time of actual purchase and financing. The mortgage agreement will require that you will provide evidence of a homeowner's insurance coverage. Additionally, you will be responsible for your property taxes. (These must be determined by you from an insurance agent and the County office respectively at the time of purchase and factored into the purchase decision to determine eligibility). Just six months into your mortgage payment, you win a lottery jackpot and decide to pay off your mortgage loan. 1. Project your annual salary and take home pay for the next five years 2. Project the amount of money in the savings account for your down payment in five years. 3. Prepare and income/expenditure statement and show your debt ratio. 4. Project the price of your house in five years and the amount to be financed after the down payment. Prepare your amortization statement until the mortgage is paid off after six months. Show your total monthly house payment which will include your property taxes and insurance. Assume that you are paying your annual property taxes and annual insurance premium on a monthly basis. Also, show the pay-off balance 5. 6

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