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A woman is looking to purchase her primary home in the Cleveland Suburbs. She has enough...

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Finance

A woman is looking to purchase her primary home in the ClevelandSuburbs. She has enough for a 20% down payment and an income of$40,000 per year. However, her FICO Score is 660. The primeInterest Rate for 30-year Mortgages is 4.75%. She has a car paymentof $400 per month and a Student Loan Payment of $200 per month. Thehome she finds has 70 Effective Property Tax Mills and Homeowner’sInsurance Costs $50 per month on every $100,000 of Home Value. Howmuch can the woman pay for the home? How large of a mortgage willthe bank allow her take out?

Answer & Explanation Solved by verified expert
4.2 Ratings (665 Votes)
Annual Income 40000 Monthly Income 4000012 333333 We have to go by 2836 rule This means she shouldnt spend more than 28 of her monthly gross income on housing which includes monthly mortgage payments interest principal property tax and home insurance This is the 28 rule The 36 rule is that the monthly debt    See Answer
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Transcribed Image Text

A woman is looking to purchase her primary home in the ClevelandSuburbs. She has enough for a 20% down payment and an income of$40,000 per year. However, her FICO Score is 660. The primeInterest Rate for 30-year Mortgages is 4.75%. She has a car paymentof $400 per month and a Student Loan Payment of $200 per month. Thehome she finds has 70 Effective Property Tax Mills and Homeowner’sInsurance Costs $50 per month on every $100,000 of Home Value. Howmuch can the woman pay for the home? How large of a mortgage willthe bank allow her take out?

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