My American Dream - Coursework Example

 Project: The American Dream Outline: Part 1: Finding a job and a home………………………………………………………….. 3 Income and Lifestyle……………………………………………………………… 3 Expenses…………………………………………………………………………. 3 Home Loan Rates…………………………………………………………………. 3 Payments………………………………………………………………………….. 4 Finding a Home…………………………………………………………………… 4 Part 2: Purchasing the home……………………………………………………………….

5 Principal and Interest………………………………..……………………………. 5 Additional Monthly Payment……………………………………………………. 5 i. Hazard Insurance………………………………………………….. 5 ii. Property Tax……………………………………………………….. 5 iii. PMI………………………………………………………………… 5 Fees and Closing…………………………………………………………………… 5 Part 3: The amortization schedules………………………………………………………… 6 The Schedule……………………………………………………………………….

6 Experiment – Extra Payments……………………………………………………. 6 Part 1: Finding a Job and a Home Income and Lifestyle Since my education is related to art, after graduating from the college I am planning to find a job in the area I am fond of to continue my personal and professional development. New York is the center of art, fashion and culture with the constant explosion to the latest trends, numerous exhibitions and art events. Though, it would be more logical to start from Chicago since New York is very expensive city.

Since my work experience in art field is less than one year, most obviously I would find the entry level position as an Administrator in the art museum, Assistant in the art gallery or Assistant of the professor in art at the college. Certainly, the salary for such positions will vary due to the location, employer, contacts, required experience, etc. Though, the average salary related to art is around $46,000 per year (SimplyHired.com, 2011). Let us say in my case such average salary can be at the level of $36,000, which means that my monthly salary will be $3,000.

I have a friend living in Chicago, so he offered me to stay at his place and in this case I can save the money for purchasing the house. Expenses According to IRS National Standards for Allowable Living Expenses, my total monthly expenditures on food, cloths, personal care products and other necessary items will be around $517 (Justice.gov, 2010). Monthly car payments will be $234 and credit card payments is $57.96. Home Loan Rates Since I already saved $15,000 I would like to have Bank of America loan of approximately $130,000 to purchase a home.

Graph 2 in the Appendix shows 3-month mortgage rate trends, including 30-year fixed, 15-year fixed and variable loan (5/1 ARM), which shows decline within the last several months. According to Table 1 in the Appendix the 30-year fixed rate and 15-year fixed rate at the Bank of America are 4.375% and 3.500% accordingly. In such a way, the monthly payments to the bank will be $649.07 and $929.35 accordingly. I will choose 30-year fixed rate with the down payment of 10%. Payments Type Total Owed Monthly Payment Car Payment $8,500 $234.

00 Credit Card $2,200 $57.96 Totals $291.96 In such a way, $3,000 as monthly salary minus $291.96 as obligatory monthly payments equals $2,708.04 x 0.34 = $920.73 or just $920 as the total monthly payment allowed. Finding a Home Considering the above mentioned annual income it is impossible at the moment to afford the expensive house, which I am dreaming about. That is why, the only reasonable solution is to purchase a house within the price range of $100,000-$150,000 and if the financial situation would be improved in the future, it might become possible to purchase better and bigger house.

Despite based on the above calculations the bank would allow me up to $920 as a total monthly payment, I decided to search for home with more realistic price for me as a young person. I found the house with the price of $145,000 (monthly mortgage payment is $299). The house has 1,190 sq ft, 3 bedrooms, and 1 bath. Its address is 9220 Merrill Ave., Chicago, IL 60617 (Zillow.com, 2011). Graph 1 in the Appendix shows the market comparison of prices between the chosen home and other buildings on the same street, in the same area and city.

As the graph shows, the price for the chosen house is higher than prices for other buildings on the same street and in the same area. Part 2: Purchasing the Home Principal and Interest The monthly P & I payment is $623.36. Additional Monthly Payment i. Hazard Insurance The house I choose was built in 1953. Insurance company HomeOwnersInsurance.com quoted me with $186 insurance payment. In such a way, monthly homeowners insurance will be $15.50. ii. Property Tax In 2009 the property tax for the current home was $1,486.

In 2011 the value of the house is $145,000 x $15 / $1,000 = $2,175 as yearly property tax. In such a way, the monthly property tax is $2,175 / 12 = $181.25. iii. PMI Below table provides information about yearly cost of PMI for 15-year and 30-year loan: Down Payment Monthly PMI for 15 year loan Monthly PMI for 30 year loan 10% $30.16 $40.95 The monthly cost of PMI will be $30.16 (15-year loan) and $40.95 (30-year loan). Total sum will be $15.50 (monthly hazard insurance) + $181.25 (monthly property tax) + $40.

95 (monthly PMI) + $623.36 (monthly P & I payment) = $861.06 (PITI monthly payment). Fees and Closing I = P x r x t = 130,000(0.0434)(1/12) = $470.17 Part 3: The amortization schedules The Schedule Mo. # Mo-Yr Total Pymt Escrow PMI P&I pymt Interest Principal Balance LTV 0             130 000.00 95.00 % 1 Dec 11 861.06 145.00 40.95 623.36 497.50 125.86 129 874.14 94.91 % 2 Jan 12 861.06 145.00 40.95 623.36 497.01 126.35 129 747.79 94.81 % 3 Feb 12 861.06 145.00 40.95 623.36 496.52 126.84 129 620.95 94.71 % 4 Mar 12 861.06 145.00 40.95 623.36 496.03 127.33 129 493.62 94.62 % 116 Jul 21 861.06 145.00 40.95 623.36 420.39 202.97 109 720.00 80.18 % 117 Aug 21 861.06 145.00 40.95 623.36 419.97 203.39 109 487.37 80.01 % 118 Sep 21 820.11 145.00 0 623.36 419.55 203.

81 109 254.74 79.84 % 119 Oct 21 820.11 145.00 0 623.36 419.13 204.23 109 022.11 79.67 % 358 Sep 41 820.11 145.00 0 623.36 8.85 614.51 1 546.31 1.13 % 359 Oct 41 820.11 145.00 0 623.36 7.97 615.39 780.00 0.57 % 360 Nov 41 819.61 145.00 0 622.86 7.09 615.77 (0.00) 0.00 %           224 409.10 115 255.83 126 427.82     Experiment – Extra Payments Mo. # Mo-Yr Total Pymt Escrow PMI P&I pymt Interest Principal Balance LTV 0             130 000.00 95.00 % 1 Dec 11 861.06 145.00 40.95 623.36 497.50 125.86 129 874.14 94.91 % 2 Jan 12 861.06 145.00 40.95 623.36 497.01 126.35 129 747.79 94.81 % 3 Feb 12 861.06 145.00 40.95 623.36 496.52 126.84 129 620.95 94.71 % 4 Mar 12 861.06 145.00 40.95 623.36 496.03 127.33 129 493.62 94.62 % 116 Jul 21 861.06 145.00 40.95 623.36 420.39 202.97 109 720.00 80.18 % 117 Aug 21 861.06 145.00 40.95 623.36 419.97 203.39 109 487.37 80.01 % 118 Sep 21 861.06 145.00 0 664.31 419.55 244.

76 109 200.00 79.80 % 119 Oct 21 861.06 145.00 0 664.31 418.58 245.73 108 912.63 79.59 % 327 Feb 39 861.06 145.00 0 664.31 12.11 652.20 2 340.00 1.71 % 328 Mar 39 861.06 145.00 0 664.31 8.97 655.34 1 518.94 1.11 % 329 Apr 39 861.06 145.00 0 664.31 5.82 658.49 684.21 0.50 % 330 May 39 739.36 145.00 0 550.47 2.64 547.83 (0.00) 0.00 %           214 317.31 106 641.85 126 427.82     Appendix: Graph 1: Market Comparison: Home, Street, Area, City Graph 2: 3-Month Mortgage Rate trends Monthly Payment Rate % Points % APR % Top of Form 30-Year Fixed Rate $649.07 4.375 0.750 4.524  15-Year Fixed Rate $929.35 3.500 0.875 3.781  7/1 ARM $565.77 3.250 0.875 3.270  (Variable) 5/1 ARM $539.36 2.875 1.000 3.120  (Variable) Bottom of Form Monthly Payment Rate % Points % APR % Top of Form 30-Year Fixed Rate $649.07 4.375 0.750 4.524  15-Year Fixed Rate $929.35 3.500 0.875 3.781  7/1 ARM $565.77 3.250 0.875 3.270  (Variable) 5/1 ARM $539.36 2.875 1.000 3.120  (Variable) Bottom of Form Table 1: Bank of America Mortgage Rates in Chicago, IL Monthly Payment Rate % Points % APR % 30-Year Fixed Rate $649.07 4.375 0.750 4.524 15-Year Fixed Rate $929.35 3.500 0.875 3.781 5/1 ARM $539.36 2.875 1.000 3.120 Source: Bank of America, 2011.

https://www9.bankofamerica.com/home-loans/mortgage-purchase/TodaysRateResults.go?referrer=/home-loans/mortgage-purchase/rates References: Average Salary in Art Jobs. SimplyHired.com, 2011. http://www.simplyhired.com/a/salary/search/q-art+gallery+assistant/l-new+york,+ny IRS National Standards for Allowable Living Expenses. Justice.gov, 2010. http://www.justice.gov/ust/eo/bapcpa/20091101/bci_data/national_expense_standards.htm Zillow.com. Purchasing a house in Chicago. 2011. http://www.zillow.com/homedetails/9220-S-Merrill-Ave-Chicago-IL-60617/4113139_zpid/#{scid=hdp-site-map-list-address}