Buying and Financing a House

Assuming the individual is a recent graduate in engineering who will be working in the Philadelphia area, the estimate annual salary is $44,970. According to The State of Working Pennsylvania 2001 (Bradley & Herzenberg, 2001), the median wage equivalent for a male college graduate in 2001 was $21.14 per hour, which was an increase of 2.27 percent from 2000. Assuming a similar increase from 2001 to 2001, the median wage rises to $21.62 per hour. Assuming 40 hours per week and 52 weeks per year paid, the annual salary approximates $44,970 [($21.62 ? 40) ? 52 = $44,969.60].

Assuming that the individual has no major outstanding bills with acceptable credit, an accepted rule of thumb is that the individual can qualify for a mortgage approximating 2.5 times annual income. This criterion establishes the maximum mortgage limit at $134,910 [$44,970 ? 3 = $134,910]. Another rule of thumb is that mortgage principal and interest should not exceed 30 percent of monthly income. This criterion establishes the maximum monthly mortgage payment at $1,124 [($44,970 / 12) ? .30 = $1,124.25].

A further assumption was that the individual would like to buy a single-family house on about a half acre in Lancaster County, Pennsylvania. The individual located an available house in Peach Bottom, Lancaster County, Pennsylvania. The house is in ZIP Code 17563. It is a 152 year-old two story detached, traditional house with three bedroo

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Category: Business - B