You can afford a $800 per month mortgage payment. You've found a 30 year loan at 8% interest. a) How big of a loan can you afford? b) How much total money will you pay the loan company? c) How much of that money is interest?
Use this formula to find the PV of 360 payments of $800 each at 8% compounded monthly:
PV=?; P=800; R=0.08/12; N=30*12; PV=P*(((1 + R)^N - 1)*((1 + R)^-N)* R^-1)
PV==$109,026.80 - amount of mortgage you can afford.
$800 x 360 months ==$288,000 principal + interest paid to the loan company.
$288,000 - $109,026.80 ==$178,973.20 - interest paid over 30 years.