Question

3.   Given: Applicant's monthly gross income is $2,500.
  

The following are all monthly expenses.

1.   Mortgage payment $800
2.   Car payment 250
3.   Property taxes 90
4.   Mortgage insurance 30
5.   Electric bill 50
6.   Telephone bill 75

The applicant is trying to qualify for a mortgage. The lender is using ratios of 28% and 36%. Show the calculation that the buyer qualifies by:

a.   the mortgage debt ratio only. c.   both the mortgage and total debt ratios
b.   the total debt ratio only d.   neither ratio

Please show work

Answer 1

front end ratio =Monthly housing expense /gross monthly income

=(( 800+90+30)/2500)*100

=36.8%

Back end ratio=monthly housing expense/gross monthly income

=((800+250+90+30+50+75)/2500)*100

=51.8%

A) the mortgage debt ratio needs to calculate

The applicant is not qualify for loan as he /she is not complying with 28-36 rule that say front end ratio should not be more than 28% and back end ratio should not be more than 36%

monthly house expense in front end ratio include expense related to mortgage  

monthly house expense in back end ratio include all expense related to household