Project 3: Finances

MGF2106 – Project 3

Directions: This project contains multiple parts, and each part of the project contains several questions. Answer each question to the best of your ability. Record your answer for each question in the proper format and upload it to the appropriate Assignment (Projects) folder within Falcon Online by the due date posted within the Course Schedule.

Submission Format Instructions: Your submission must meet the following criteria to be accepted for grading.

• There are two options for submitting your work. Note that a requirement for each is that you must save your work as a single document.

1. Your submission can be a single, typed document saved as a Word document (.doc). Please know that every Daytona State College student has access to Microsoft Word. Refer to the Course Addendum under Microsoft Office.
2. You can also hand write your work and scan it into a single Portable Document Format (.pdf), or in Joint Photographic Expert Group (.jpeg) format.

• Your name must be at the top of your submission. Once you have answered the questions, upload your completed work to the appropriate Assignment (Projects) folder in Falcon Online. Be sure to click on “Submit” after using the “Add a file” link.
• Do not type the questions from the project into your submission. Only submit your answers to the questions.
• Follow the numbering system used in the project when typing your answers. Please be sure to answer all parts of a question.

MGF2106 Project 3: Finances

Directions: Answer each question thoroughly using proper grammar and complete sentences. Record your answers in a separate document and submit your work according to the criteria provided in the Project Instructions. You must work alone on this project, as it is specific to you. Please show all of your work, when applicable.

Your goal is to buy a house in 2 years. To accomplish this, you must first pay off some debt (this will help you qualify for a mortgage) and decide how much money you need to earn to afford this house.

The current debt you owe is found below in the table, including the interest rate.

1. You want to pay off the credit card debt in two years. Use this online credit card calculator  to figure out the payments that need to be made monthly to pay off your credit card in two years.
2. Use the same calculator to calculate how long it would take if you decided to pay an amount of $250 per month.
3. You put some money down to purchase a used car and ended up financing $7000 at 4% over 3 years. Use this online auto loan calculator to calculate your monthly payment.
4. You want to pay off your auto loan in 2 years, instead of the 3 years that you financed originally. Use this auto loan repayment calculator to calculate how much extra would you have to pay per month to pay off your car payment in 2 years instead of 3.
5. Now, figure out your student loans. To cover some tuition and materials, you took out $8500 at 6% interest over 5 years. What would your month payment be? Use this student loan calculator to calculate your monthly payment.
6. You want to pay off your student loan in 2 years. Use student loan repayment calculator to figure out how much extra you would have to pay monthly to save 3 years on the loan.
7. Find your total monthly debt payment by adding up your monthly payments for your credit card, auto loan, and student loan.
8. In order to be able to afford a home, you must have a job in order to show proof of income. Use this link of wage estimates by state to first pick the state you would like to live in, and then click on the state and find the annual mean wage for the job you would like. List the state you selected, the job, and the annual mean wage. Also, determine what your monthly mean wage would be.
9. Now, let’s have some fun and go house shopping. Go to Zillow and find a house you would like to buy that seems realistic for your lifestyle and where you want to live. You can search a city, state, neighborhood, or somewhere close to where you would like to work. Copy and paste the link to the house below. How much is the home? Why did you pick this house? What do you like about it?
10. When you purchase a home, you must pay a sum of money at the time of purchase, referred to as the down payment. There are several factors that can affect your down payment, including your credit history, the type of mortgage, the price of the home, and the type of home. You are not sure if you are going to put 5%, 10%, or 20% of the total cost of the house down. Multiply the down payment percentage by the cost of the house and fill in the table. This will tell you how much money you need to save up ahead of time for your down payment.

11. Let’s figure out your monthly payment for that house. You have enough money saved up to put 20% down payment on the house. Use this mortgage calculator to calculate your monthly payment. You must enter in the price of the home (from Zillow), select the 20% down payment, the loan term (use 30 years), the current interest rate of 7%, and the zip code where the house is found. Make sure to click on the optional tab and enter zeros for all of those choices, for now. What is your monthly payment for this house?
12. When you own a home, you must pay property tax, which funds services in your community (like emergency services, schools, infrastructure, libraries, etc.) We need to now add in the property tax. Use this Property Tax Rate by State link to find the Effective Real Estate Tax Rate % for the state that you want to purchase a house in and fill in the table below. Fill in the cost of home from Zillow and the Effective Real Estate Tax Rate %, then multiply the two to find the total cost of yearly taxes. Finally, divide this annual cost into monthly payments.

13. Now let’s estimate the cost of homeowners insurance (again, you are required to have this when you have a mortgage). Scroll down a little bit and check the average annual and monthly cost for homeowners insurance for your state. Fill in the table below.

14. Find your total monthly payment by adding up the monthly mortgage payment (from #11), your monthly property taxes (from #12), and your homeowner’s insurance per month (from #13).
15. The 28% rule says you should keep your mortgage payment under 28% of your gross income (that’s your income before taxes are taken out). To figure this out, take your total monthly mortgage payment (#14) and divide that by your monthly income (#8), then multiply by 100%. What percentage did you get? Is it less than 28%?
16. Would you be able to afford the house you selected? Why or why not?
17. Your monthly mortgage payment includes the cost of your home, property taxes, and homeowners insurance. Discuss the other expenses you might have when you own a home, thinking about the following questions: What expenses might you have to keep a home running (think utilities, if you chose a house with a pool – a pool service, etc.)? What other monthly expenses do you have currently that you need to include in your monthly budget? What about emergencies or major repairs (like replacing a broken appliance)? What about fun stuff, like purchasing new furniture or remodeling parts of your house?

Last Updated on July 3, 2024