Math for Grownups by Laura Laing Read Free Book Online Page A

necessarily use every single number that you have.
4. Does the solution make sense?
    When you find the solution, be sure to check it out. In other words, know what makes a reasonable answer.
    Let’s say you’re trying to find the monthly payment on a $12,900 car loan. If you come up with $14,358.98, you’ve probably made a mistake somewhere along the line. Unless you’ve got the worst car loan in history, you’re not going to pay more than the car is worth each month. Likewise, if you find that your monthly payment is only $76.34, you may want to take another look at your calculations. It would be nice to have such a low monthly payment, but that’s not likely, given the price you are paying for the car.

On the Market: Buying a House by the Numbers
     
    It’s the American dream. Perhaps you’re in the market for a house in the ’burbs with a picket fence and a big front porch. Or maybe you’re a city mouse, looking for shelter among row houses or modern condos. Heck, you could even be considering roughing it off the grid in a modest cabin in the woods.
    Unless you’re renting a studio apartment in the Big Apple or are content living in your parents’ basement, buying a home is probably on your list of things to do as a grownup. But stepping into the real estate market can feel like jumping out of a perfectly good airplane. It’s downright scary.
    That’s because most folks don’t have hundreds of thousands of dollars lying around. And that means one simple thing: When you buy a house, you agree to make a monthly mortgage payment.
    Houses have big price tags. And mortgages are long-term commitments. But a few figures can give you the confidence to pull that parachute cord at just the right moment—and land safely on your feet.

Throwing Down
     
    You can’t get something for nothing, right? At least that’s what your mama always told you. And that’s why she wouldn’t approve of a zero-down mortgage.
    Unless you’re a veteran with a Veterans Administration loan, you should expect to make a down payment on your house. And not just to please good old mom. The fact is, she has good reason to be suspicious of zero-down mortgages. When you skip the down payment, you’re borrowing a larger chunk of cash, which means a bigger monthly bill from your lender. But even worse is not having any equity in your home when you move in. If the real estate market goes south, you could find yourself “upside-down” on your mortgage—that is, owing more than the property is worth. In other words, if you had to sell your house, you wouldn’t get enough to pay back your lender. And that’s a scary situation.
    Lenders really like down payments, too. Down payments say, “These buyers are trustworthy. They know how to save money. They’re serious about buying a house.”
    But down payments are not just great for wooing the perfect lender. They also lower your monthly payment—which in turn lowers the amount of money that you’ll pay in interest on the loan
and
the total amount you’ll be shelling out over the life of the loan.
    In short, making a $40,000 down payment up front can save you big bucks over 30 years.
    Are you convinced yet?
    There’s another reason to make a large down payment: private mortgage insurance, or PMI. Remember, your down payment says, “You can trust me.” A big down payment means the lender can
really
trust you. If you don’t have at least 20% to put down, your lender will require that you pay a little extra each month for insurance on your loan. This protects the lender in case you don’t make your house payments.
    Just like a down payment on a car, the down payment on a house is a percent of the total price of the house. And just as in the purchase of a car, the amount you have for your down payment is one of the things that will affect how much house you can afford.
    An example will probably help.
    It’s been 10 years since you graduated. You have a great job and your college loans are