Janice and Steve Lester are planning on purchasing their first home and are inte

Question

Janice and Steve Lester are planning on purchasing their first home and are interested in determining the maximum monthly mortgage payment they can qualify for given that the lender has indicated that their total installment loan payments cannot exceed 35% of gross monthly income. You inform them that with this guideline, they qualify for a monthly mortgage payment of _______ .

$5,000

300

150

A) $1,750
B) $1,300
C) $1,450
D) $1,600
E) There is insufficient information to determine.

$5,000

300

150

Explanation / Answer

Monthly mortgage payment (P&I) @ 35% of gross income

= 0.35* $ 5,000 = $1,750

Additional payments for car and computer loan = $450 Taking both payments into consideration, Monthly mortgage payment is $ 1750 - $ 450 = $ 1300

So the current answer is B $ 1,300

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