Help! I feel like something's missing from this real estate finance problem.
"Find the amount of the down payment necessary for the buyer to afford monthly payments for the described home (use this table to calculate your answer to the nearest hundred)*. The monthly salary is $2,300 with monthly bills of $440. It's a $125,000 home with a 30-year 10% loan."
*The table provided shows the monthly cost to finance $1000 as 8.78 on a 30-yr loan at 10% (not sure why entire table is isn't visible here).
No other info is given and my instructor is not replying to give clarification.
Would you assume the term "monthly bills" means monthly recurring bills *other* than the mortgage? I did. In the book chapter, there's mention of a typical debt to income ratio of 36, so I used $828 as the max the buyer can have going toward all debt payments, meaning only $388 is left for mortgage payments.
I went with the formula in the screenshot. I used 0.00878 for *r* since that's what's on the table the instructor provided. The answer I arrived at for the principle loan amount is $42,295, meaning the rounded down payment required is $82,800, but that's not accepted as correct. I rounded up because it's a down payment.
Where have I gone wrong?