QUESTION 1 Kinny is a single dad. His family lives in Raleigh but he wanted some space while being close enough to visit, so he took a job as a radiologist for a clinic in Virginia Beach. Kinny's daughter Sivan is starting kindergarten, and now that he doesn't have to pay for preschool every day Kinny is ready to start saving up for a home of their own. His gross annual pay is $62,610. Considering that most single parents with one child have about 20% of their gross income withheld for federal and state taxes, Medicare, Medicaid, Social Security, and other unavoidable expenses, about how much net income does Kinny bring home every month? QUESTION 2 The recommended "rule" is to keep housing expenses to less than 1/3 of your net income. What is the maximum that Kinny should be spending on housing each month? QUESTION 3 Housing includes homeowners insurance, utilities such as electricity, natural gas, water, sewer, and trash pick up. For most households these are about 25% of the housing expenses. After accounting for these, what is the maximum mortgage payment that Kinny can afford each month? QUESTION 4 Now let's estimate the maximum sale price Kinny can afford for his home. We will do it in three steps. 1. Take the amount from the previous question and multiply it by 12 and then by 30. This is how much he would be able to pay in 30 years of payments. 2. Since interest usually accounts for about half of the total paid in 30 year loans, divide your number from above by 2. This tells you how much of a mortgage loan Kinny can afford. 3. Since we will assume Kinny will make a large enough down payment to avoid private mortgage insurance, multiply by 1.25 to estimate the maximum house price Kinny can afford, some of which he will pay with the down payment and some of which he will pay with the mortgage. What is the maximum sale price Kinny can afford for his house?
QUESTION 1 Kinny is a single dad. His family lives in Raleigh but he wanted some space while being close enough to visit, so he took a job as a radiologist for a clinic in Virginia Beach. Kinny's daughter Sivan is starting kindergarten, and now that he doesn't have to pay for preschool every day Kinny is ready to start saving up for a home of their own. His gross annual pay is $62,610. Considering that most single parents with one child have about 20% of their gross income withheld for federal and state taxes, Medicare, Medicaid, Social Security, and other unavoidable expenses, about how much net income does Kinny bring home every month? QUESTION 2 The recommended "rule" is to keep housing expenses to less than 1/3 of your net income. What is the maximum that Kinny should be spending on housing each month? QUESTION 3 Housing includes homeowners insurance, utilities such as electricity, natural gas, water, sewer, and trash pick up. For most households these are about 25% of the housing expenses. After accounting for these, what is the maximum mortgage payment that Kinny can afford each month? QUESTION 4 Now let's estimate the maximum sale price Kinny can afford for his home. We will do it in three steps. 1. Take the amount from the previous question and multiply it by 12 and then by 30. This is how much he would be able to pay in 30 years of payments. 2. Since interest usually accounts for about half of the total paid in 30 year loans, divide your number from above by 2. This tells you how much of a mortgage loan Kinny can afford. 3. Since we will assume Kinny will make a large enough down payment to avoid private mortgage insurance, multiply by 1.25 to estimate the maximum house price Kinny can afford, some of which he will pay with the down payment and some of which he will pay with the mortgage. What is the maximum sale price Kinny can afford for his house?
Chapter3: Computing The Tax
Section: Chapter Questions
Problem 9BCRQ
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Transcribed Image Text:QUESTION 1
Kinny is a single dad. His family lives in Raleigh but he wanted some space while being close enough to visit, so he took a job as a radiologist for a clinic in Virginia Beach.
Kinny's daughter Sivan is starting kindergarten, and now that he doesn't have to pay for preschool every day Kinny is ready to start saving up for a home of their own. His
gross annual pay is $62,610.
Considering that most single parents with one child have about 20% of their gross income withheld for federal and state taxes, Medicare, Medicaid, Social Security, and
other unavoidable expenses, about how much net income does Kinny bring home every month?
QUESTION 2
The recommended "rule" is to keep housing expenses to less than 1/3 of your net income. What is the maximum that Kinny should be spending on housing each month?
QUESTION 3
Housing includes homeowners insurance, utilities such as electricity, natural gas, water, sewer, and trash pick up. For most households these are about 25% of the housing
expenses. After accounting for these, what is the maximum mortgage payment that Kinny can afford each month?
QUESTION 4
Now let's estimate the maximum sale price Kinny can afford for his home. We will do it in three steps.
1. Take the amount from the previous question and multiply it by 12 and then by 30. This is how much he would be able to pay in 30 years of payments.
2. Since interest usually accounts for about half of the total paid in 30 year loans, divide your number from above by 2. This tells you how much of a mortgage loan Kinny
can afford.
3. Since we will assume Kinny will make a large enough down payment to avoid private mortgage insurance, multiply by 1.25 to estimate the maximum house price Kinny
can afford, some of which he will pay with the down payment and some of which he will pay with the mortgage.
What is the maximum sale price Kinny can afford for his house?
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