Suppose an individual has $45,000 in annual income and considering a home that they intend to finance with a $150,000 mortgage at 4% APR 30-year fixed rate loan, the real estate taxes and insurance are $2,000 per year, auto payments are $350/month, and student loans payments are $400/month.

(1) Calculate the two qualification ratios.

(2) Would this individual qualify for this loan using a standard 28/36 ratio criteria?

Show all work for credit.


Answer:
Front end

PMT $716.12
Insurance and Taxes $166.67
PITI $882.79

FE=PITI/Gross income = (Principle + Interest + Taxes + Insurance) / Gross Mo inc

Ratio 1 24%
Ratio 2 44%

Economics

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