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# House Price Affordability.

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If I'm a working person with a family of four, what house price can I afford if I can put a downpayment of \$100,000 and can afford a monthly payment of \$2,500 on a 30-year mortgage at the current rate of 4% APR? Any help would be greatly appreciated and thank you.

Guest Jun 1, 2017
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You have to sum up all the Present Values of all your expected 360 mortgage payments at the interest rate given. That would be the total mortgage you can afford. Then just add on your \$ 100,000 downpayment, and that is the house you can afford to buy. Will use this common formula to do that:

PV=P{[1 + R]^N - 1 / [1 + R]^N / R}

PV = P x {[1 + 0.04/12]^(30*12) - 1 / [1 + 0.04/12]^(30*12) / (0.04/12)}

PV = 2,500 x {[1.0033333]^360 - 1 / [1.0033333]^360 / (0.0033333)}

PV = 2,500 x                         209.461240.........

PV = \$523,653.10 - this is the amount of mortgage you can afford @ 4% for 30 years. Then:

\$523,653.10 + \$100,000 =\$623,653.10 - This is the price of the house that can afford to buy.

Guest Jun 1, 2017

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