HOME BUYING CASE STUDY

By:Tyler Gowans, Andro Batinic, and Josh Clark

John Berka Credit Score: 551 Assets:$1,200 in checking $4,050 in savings$5,000 in CDs (4.9%) $89,000 in 403(b) plan$26,482 in an IRA $18,000 in his car$15,028 in 3 growth mutual funds$190,000 in his house$50,000 in personal property His total net worth is $353,760.

Liabilities:$45,000 in debtMonthly expenses average $4,000 Mortgage payment is $1,228Car payment is $529Monthly child support of $420He also deposits $650 in his 403(b) monthly He has no will and a $250,000 term life policy that

still names his deceased wife as the beneficiary. Based on his assets and liabilities John can afford

a monthly payment ranging from $1,750-$2,450

Housing Option #1Pros and ConsPros: Walking distance to “best areas of the city”, owners remodeled the home and replaced most of the problems in the home that come with age.

Cons: Built in 1912, commute to work could be long.

Housing Option #2Pros and ConsPros: Small, meets John’s needs, affordable, easy commute.

Cons: Older building (built in 1940), small

Housing Option #3Pros and ConsPros: Easy commute

Cons: No information on website, Expensive for John’s needs.

Housing Option #4Pros and ConsPros: Affordable for John’s current situation, privacy, safety, jetted tub, built in 2001, very low crime rate (we checked), he could pay for a large portion of it just by selling the place he is in now.

Cons: John doesn’t need that much space.

Buying Housing Option #4 Down Payment: $33,180 – if he sells his

house he is currently living in (worth $190,000) he would have enough for the down payment plus some.

Maximum Mortgage John could qualify for would be around $300,000 based on a 30 year fixed with an option to refinance once his credit score increases.

Needs and Wants Needs: Shelter, Privacy, and Safety. Wants: Jetted Tub, 4 bedrooms and 4

bathrooms, low crime rate.

Paying it off If he pays the minimum monthly

payment of $1,217.32 John will pay the house off in 30 years unless he decides to refinance.

The total John would pay in interest is $10,617.60

5 Years 10 Years

15 Years

20 Years

25 Years

30 Years

0%10%20%30%40%50%60%70%80%90%

100%

PrincipalInterest

Conclusion The best choice for John would be to

stay in the house he is currently residing in since the home is already close to being paid off.

John would be likely to live there until retirement age where he could move into a retirement community.