- Budgeting
- Cash Management
- Consumer and Mortgage Loans
- Debt and Debt Reduction
- Time Value of Money 1: Present and Future Value
- Time Value of Money 2: Inflation, Real Returns, Annuities, and Amortized Loans
- Insurance 1: Basics
- Insurance 2: Life Insurance
- Insurance 3: Health, Long-term Care, and Disability Insurance
- Insurance 4: Auto, Homeowners, and Liability Insurance
- The Home Decision
- The Auto Decision
- Family 1: Money and Marriage
- Family 2: Teaching Children Financial Responsibility
- Family 3: Financing Children’s Education and Missions
- Investments A: Key Lessons of Investing
- Investments B: Key Lessons of Investing
Case Study #1
Data
Bill and Brenda make $60,000 per year. They decided that they have outgrown their small house, and found the house they wanted for $225,000. They have agreed to a thirty-year loan, and estimate property taxes and insurance costs will be $200 per month, and estimate they can get a fixed-rate mortgage loan for 6.5 percent. They have a car loan of $270 per month and student loan of $50 per month.
Calculations
Calculate Bill and Brenda’s front-end ratio and back-end ratio (28% and 36%, respectively).
Application
What is the amount that most banks will lend them (remember that most banks will lend to the lower of the two ratios).
