# Lease versus Purchase Decision Cost of Purchasing

 W 11 WORKSHEET Worksheet for Calculating the Maximum Monthly Mortgage Payment and Mortgage Size for Which You Can Qualify Method 1 Determine Your Maximum Monthly Mortgage Payment Using the Ability to Pay, PITI Ratio. a. Monthly income (annual income divided by 12) b. Times 0.28: Percentage of PITI (Principal, interest, taxes, and insurance) to your monthly gross income that lenders will lend in the form of a mortgage loan (multiply line a by 0.28) x 0.28 = \$0 c. Less: Estimated monthly real estate tax and insurance payments – d. Equals: Your maximum monthly mortgage payment using the 28% of PITI ratio = \$0 To Determine the Maximum Mortgage Loan Level Using the Maximum Monthly Mortgage Payments as Determined Using the PITI Ratio (line d): Step 1: Monthly mortgage payment for a \$10,000 mortgage with a ____ year maturity and a ____% interest rate (using Table 8.1) = Step 2: Maximum mortgage level = maximum monthly mortgage payment (line d) divided by the monthly mortgage payment on a \$10,000, ____%, ____year mortgage (step 1 above) times \$10,000 = (line d/step 1) x \$10,000 = Method 2 Determine Your Maximum Monthly Mortgage Payment Using the Ability to Pay, PITI Plus oth Fixed Monthly Payments, Ratio. e. Monthly income (annual income divided by 12) f. Times 0.36: Percentage of PITI + current monthly fixed payments to your monthly gross income that lenders will lend in the form of a mortgage loan (multiply line a by 0.36) x 0.36 = \$0 g. Less: Current nonmortgage debt payments on debt that will take over 10 months to pay off and other monhtly legal obligations such as child support and allimony payments – h. Less: Estimated monthly real estate tax and insurance payments – i. Equals: Your maximum monthly mortgage payment using the 36% of PITI + other fixed Monthly payments ratio (line f  – g – h) = \$0 To Determine the Maximum Mortgage Loan Using the PITI Plus Other Fixed Monthly Payments Ratio (line i): Step 1: Monthly mortgage payment for a \$10,000 mortgage with a ____ year maturity and a ____% interest rate (using Table 8.1) = Step 2: Maximum mortgage level = maximum monthly mortgage payment (line d) divided by the monthly mortgage payment on a \$10,000, ____%, ____year mortgage (step 1 above) times \$10,000 = (line i/step 1) x \$10,000 = Method 3 Determine Your Maximum Mortgage Level Using the “80% of the Appraised Value of the House” Rule. j. Funds availble for the down payment and closing costs k. Less: Closing costs – l. Equals: Funds available for the down payment = \$0 m. Times 4: Maximum mortgage level using the “80% of the appraised value of the house” rule (the 20% down, line l, times 4 equals the 80% you can borrow) x 4 = \$0 Conclusion: Maximum Mortgage Level for Which You Will Qualify (the lowest of the amounts using method 1, method 2, or method 3) =