PSI New Jersey Real Estate State Practice Exam

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Prepare for the New Jersey Real Estate Exam. Ace your test with comprehensive multiple-choice questions. Each question includes detailed explanations and hints. Start studying today and boost your confidence!

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If a couple is currently renting for $1750 per month, would their principal and interest payments on a $249,000 mortgage at 5% interest for 30 years be affordable for them?

No, it would be significantly higher
Yes, it will be within their rent budget
It depends on additional fees
Yes, but only if they put 20% down

The correct answer is: Yes, it will be within their rent budget

To determine affordability, it’s important to calculate the expected principal and interest payments on the mortgage and compare it to their current rent of $1,750 per month. Using the mortgage constant formula for a fixed-rate mortgage can help in this analysis. For a fixed-rate mortgage at 5% interest over 30 years, the monthly payment can be calculated using the formula for a fixed-rate mortgage payment, which considers the loan amount, interest rate, and loan term. When applying these figures, the monthly payment for a $249,000 mortgage should end up around $1,335. This amount is significantly below the couple's current rent payment of $1,750. Since this mortgage payment is well within their rent budget, it suggests that they could afford the principal and interest payments on the mortgage without exceeding what they currently pay for rent. Thus, the finding that their payments would be manageable under these conditions aligns perfectly with the affordability assessment portrayed in the correct answer.