SOLUTION: Bill earns 60000 a year Betty earns 2400 per month how much can Bill and Betty pay monthly for their mortgage payment if the lender uses a 28 percentage qualifying ratio

Question 1121303: Bill earns 60000 a year Betty earns 2400 per month how much can Bill and Betty pay monthly for their mortgage payment if the lender uses a 28 percentage qualifying ratio
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
bill earns 60,000 a year.
betty earns 2400 per month.

60,000 a year divided by 12 = 5000 a month.

together they earn 7400 a month.

if their monthly mortgage payment shouldn't be more than 28% of their monthly income, then they can afford a monthly mortgage payment of .28 * 7400 = 2072 per month.

the mortgage amount they can lend depends on the interest rate.

a payment of 2072 per month at 3% per year interest on a 30 years mortgage allows them to borrow $491,456.

at 4% per year, they can borrow $434,003.

at 5% per year, they can borrow $385,975.

in other words, the higher the interest rate, the less they can borrow with a fixed payment of $2,072 per month.

but that's more than you need to know, even though you might find it interesting.

all you need to know is that, given the maximum monthly mortgage payment is 28% of their monthly income, they can afford to pay up to $2,072 per month on the mortgage.

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