Homes Ronting and Buying Workaheet P/100 Version 1 6. Debt paymentsto-income rat
ID: 2789860 • Letter: H
Question
Homes Ronting and Buying Workaheet P/100 Version 1 6. Debt paymentsto-income ratios will likely be considered as you apply for a mortgage. The Focus on Personal Finance ted sggests keeing fia ratio teow 20% A mortgage wider wil have ter own rato for all debt payments, including mortgage-toinoome ratio, before they will oonsider approval Using this information, nswer the questions and show your ealiculations in the table below . Net monety icon·84000 Expected fuil mortgage payment (PIT $1,000 . Student loan payment: $200 . Car payment $300 Enter your caloulation and What is this person's debt payments-to- ncome ratio? What is this person's debt payments to ncome ratio when the full mortgage payment is inoluded? the mortgage lender required total payment to noone rato below 40%. would this person meet that standard? the mortgage lender required total what is the maximum monthly payments standard?Explanation / Answer
The monthly income = 4000
Student loan payment = 250
Car payment = 300
and full mortagage payment = 1000
The person's debt payments to income ratio = 250+300 / 4000
= 550 / 4000
= 0.1375
=13.75%
The persons debt payment to income ratio when the full mortgage payment is included
= 250+300+1000 / 4000
= 1550 / 4000
= 0.3875
=38.75%
If the mortgage lender requires total payment to income ratio below 40%. the person meets the standard as his full mortgage payment ratio is well below 40% at 38.75% and thus it meets the standards successfully.
If the mortgage lender required total payment to income ratio is below 45%, the maximum payment the person could make to meet the standards is:
45% = X / 4000
X = 45% of 4000
X = 1800
thus the payment less than 1800 meets the standards.
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