ssignment Instructions
John and Maria would like to purchase a property for $610,000 and are planning to make a down payment of 10 percent. They hope to qualify for a 2.75 percent, 30-year, fixed-rate mortgage (no points).
John works as a salesman earning $60,000 a year and Maria is a paralegal working at a law firm earning $63,000 a year, both have been at their respective employers for over 2 years. Hint: add these two annual incomes, then divide by 12 months for their joint monthly gross income.
Property taxes on this home will be $510 a month, homeowners insurance will be $90 a month and mortgage insurance will be $132 a month.
Please answer these 3 questions:
1 What is the monthly payment on this loan ? (principle and interest only, do Not include taxes or insurance). (See mortgage101.com or bankrate,com and find the mortgage loan calculator or better yet open a mortgage calculator app on your smart phone). Hint: I need a monthly dollar amount.
2 If the conventional lender requires a front-end, income-to-debt ratio of 28%, (same as a housing expense to income ratio) do they meet this requirement ? Include principle, interest, taxes, homeowners insurance and mortgage insurance. Provide your calculations in your response. Hint: All I need is a single percentage. Also do not round up or down. If your answer is 26.71 percent it is 26.71 not 27 percent.
3 If the same lender requires a maximum, back-end income-to-debt ratio of 38%, (which includes other monthly fixed payments such as an auto loan or auto lease, student loans, revolving credit, possible child support payments…do they meet this requirement ? Hint: All I need is a single percentage. Another Hint: This percentage will be higher than your answer in Question 2. As in Question 2, do not round up or down.
John and Maria’s auto loan is: $390 a month and Maria’s student loan is $450 a month. They are good financial consumers who pay off their credit cards each month so the lender will not count credit card debt as a monthly payment. As a result their credit (FICO) score is 780.
Provide your responses in writing and number them 1, 2 and 3.
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