Scor Question Help 4.D.49 You can afford monthly payments of $500. If current mortgage rates are 2.83% for a 15-year fixed rate loan, how much can you afford to borrow? If you are required to make a 10% down payment and you have the cash on hand to do it, how expensive a home can you afford? (Hint: You will need to solve the loan payment formula for P.) How much can you afford to borrow? S(Round to the nearest dollar as needed.) orary cess esources 6ew

Answer:No down payment = $73 267; 10 % down payment = $81 408 Step-by-step explanation:1. With no down payment The formula for a maximum affordable loan (A) is A = (P/i)[1 − (1 + i)^-N] where  P = the amount of each equal payment i = the interest rate per period N = the total number of payments Data:      P = 500 APR = 2.83 % = 0.0283       t = 15 yr Calculations: You are making monthly payments, so i = 0.0283/12 = 0.002 358 333 The term of the loan is 15 yr, so N = 15 × 12 = 180 A = (500/0.002 3583)[1 − (1 + 0.002 3583)^-180] = 212 014(1 - 1.002 3583^-180) = 212 014(1 - 0.654 424) = 212 014 × 0.345 576 = 73 267 You can afford to spend $73 267 on a home. 2. With a 10 % down payment Without down payment, loan = 73 267 With 10 % down payment, you pay 0.90 × new loan            0.90 × new loan = 73 267 New loan = 73267/0.90 = 81 408 With a 10 % down payment, you can afford to borrow $81 408 . Here’s how it works: Purchase price =  $81 408 Less 10 % down =    -8 141                  Loan = $73 267 And that's just what you can afford.