Your annual gross (pre-tax) salary is $67,000. You can obtain a 30-year fixed rate mortgage...
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Your annual gross (pre-tax) salary is $67,000. You can obtain a 30-year fixed rate mortgage at annual percentage rate (or APR) of 6.0%. You have $5,000 in other annual pre-tax income. You also have to pay $750 per month on an auto loan and student loans. What is the most expensive home you can buy under these circumstances?
2. How much monthly mortgage payment can you afford if it can be up to 36% of your gross income when other long-term debt payments are included? (Hint: This limit comes from the back-end ratio or mortgage to income ratio which is 36%. It means lenders will not allow you to take out a mortgage such that its monthly payment when combined with payments towards other long-term debt obligations exceeds 36% of your gross monthly income. First find your gross annual income as you did in Problem 1. Then find 36% of your gross monthly income and finally subtract from that the payments required by other long-term debt obligations such as auto and student loans.)
A.$1,410
B.$1,422
C.$1,437
D.$1,449
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