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Ervin and Freda are looking for a home; their combined incomes total $77,000. The couple...

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Finance

Ervin and Freda are looking for a home; their combined incomes total $77,000. The couple were able to negotiate a rate of 5.25% for a 5-year fixed term on a 25-year amortization. The taxes are estimated at $1,800, and heating costs are $1,200; their personal debt consumption is $725 per month. The bank's guideline is 40% for the TDS and 32% for the GDS. Using the TDS guideline, determine the maximum mortgage they qualify for.

a. $254,658.19

b. $267,094.91

c. $254,723.19

d. $154,685.19

e. None of the above

The answer is B but How to calculate? Thanks!

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