11. Can I afford this home? - Part 1 Can Olivia and Anthony Afford This Home Using the Monthly Income Loan Criterion? Next week, your friends Olivia and Anthony want to apply to the Third Universal Bank for a mortgage loan. They are considering the purchase of a home that is expected to cost $185,000. Given your knowledge of personal finance, they ve asked for your help in completing the Home Affordability Worksheet that follows. (Note: When completing the form, round each dollar amount to the nearest whole dollar) To assist in the preparation of the worksheet, Olivia and Anthony also collected the following information . Their financial records report a combined gross before tax annual income of $125,000 and current (premortgage installment loan, credit card, and car loan debt of $1,823 per month Their property taxes and homeowner's insurance policy are expected to cost $1,850 per year. Their best estimate of the interest rate on their mortgage is 7.5%, and they are interested in obtaining a 15-year loan They have accumulated savings of $44,500 that can be used to satisfy the home's down payment and dosing costs - The lender requires a minimum 20% down payment and an affordability ratio that ranges from a minimum of 25% to a maximum of 30% A table of monthly payments (necessary to repay a $10,000 loan) follows: Interest Rate (9) 5.0 10 Years 106.0655 Loan Maturity 15 Years 20 Years 79.0294 65.9956 81.7083 68.7887 25 Years 158.4590 61.4082 30 Years 53.6822 5.5 108.5263 56.7789 6.0 111.0205 716432 04.4301 113.5480 84.3857 87.1107 89.8828 6,5 7.0 67.5207 74,5573 77.5299 59.9551 63.2068 66.5302 116.1085 70.6779 7,5 118.2018 69.9215 92.7012 95.5652 8.0 121.3276 80.5593 83.6440 86.7823 73.8991 77.1816 80.5227 73 3765 8.5 98.4740 123.9857 126.6750 83.9196 9.0 9.5 101.4267 104.4225 89.9726 93 2131 76,8913 80.4623 84.0854 129.3976 87.3697 10.0 132.1507 107.4605 96.5022 90.8701 B7 7572 (Note: Unless labeled differently, all of the following values represent dollar amounts. Also, some values calculated or used in the upper section of the table may also be used in the lower section) High Value Low Value Amount 30% 25% Home Affordability Worksheet Based on Monthly Income 1. Annual income 2. Monthly income 3. Lender's monthly income affordability ratio 4. Maximum monthly mortgage payment (PIT) 5. Estimated monthly property tax and insurance payment 6. Maximum monthly loan payment (P and I only) 7. Expected interest rate B. Planned loan maturity (years) 9. Mortgage payment factor per $10.000 (from the Loan Maturity table) 10 Maximum loan based on monthly income 11. Funds Available for a Down Payment and closing costs 12. Required (20%) Down Payment 13. Maximum Purchase Price Based on Monthly Income 7.5% 15 Given these results, which statement regarding Olivia and Anthony's mortgage qualification process and their purchase of their $185,000 target home is true? Olivia and Anthony do not qualify to purchase their $185,000 target home according to the Monthly Income Affordability Worksheet criterion Olivia and Anthony qualify to purchase their $185,000 target home according to the Monthly Income Affordability Worksheet criterion 11. Can I afford this home? - Part 1 Can Olivia and Anthony Afford This Home Using the Monthly Income Loan Criterion? Next week, your friends Olivia and Anthony want to apply to the Third Universal Bank for a mortgage loan. They are considering the purchase of a home that is expected to cost $185,000. Given your knowledge of personal finance, they ve asked for your help in completing the Home Affordability Worksheet that follows. (Note: When completing the form, round each dollar amount to the nearest whole dollar) To assist in the preparation of the worksheet, Olivia and Anthony also collected the following information . Their financial records report a combined gross before tax annual income of $125,000 and current (premortgage installment loan, credit card, and car loan debt of $1,823 per month Their property taxes and homeowner's insurance policy are expected to cost $1,850 per year. Their best estimate of the interest rate on their mortgage is 7.5%, and they are interested in obtaining a 15-year loan They have accumulated savings of $44,500 that can be used to satisfy the home's down payment and dosing costs - The lender requires a minimum 20% down payment and an affordability ratio that ranges from a minimum of 25% to a maximum of 30% A table of monthly payments (necessary to repay a $10,000 loan) follows: Interest Rate (9) 5.0 10 Years 106.0655 Loan Maturity 15 Years 20 Years 79.0294 65.9956 81.7083 68.7887 25 Years 158.4590 61.4082 30 Years 53.6822 5.5 108.5263 56.7789 6.0 111.0205 716432 04.4301 113.5480 84.3857 87.1107 89.8828 6,5 7.0 67.5207 74,5573 77.5299 59.9551 63.2068 66.5302 116.1085 70.6779 7,5 118.2018 69.9215 92.7012 95.5652 8.0 121.3276 80.5593 83.6440 86.7823 73.8991 77.1816 80.5227 73 3765 8.5 98.4740 123.9857 126.6750 83.9196 9.0 9.5 101.4267 104.4225 89.9726 93 2131 76,8913 80.4623 84.0854 129.3976 87.3697 10.0 132.1507 107.4605 96.5022 90.8701 B7 7572 (Note: Unless labeled differently, all of the following values represent dollar amounts. Also, some values calculated or used in the upper section of the table may also be used in the lower section) High Value Low Value Amount 30% 25% Home Affordability Worksheet Based on Monthly Income 1. Annual income 2. Monthly income 3. Lender's monthly income affordability ratio 4. Maximum monthly mortgage payment (PIT) 5. Estimated monthly property tax and insurance payment 6. Maximum monthly loan payment (P and I only) 7. Expected interest rate B. Planned loan maturity (years) 9. Mortgage payment factor per $10.000 (from the Loan Maturity table) 10 Maximum loan based on monthly income 11. Funds Available for a Down Payment and closing costs 12. Required (20%) Down Payment 13. Maximum Purchase Price Based on Monthly Income 7.5% 15 Given these results, which statement regarding Olivia and Anthony's mortgage qualification process and their purchase of their $185,000 target home is true? Olivia and Anthony do not qualify to purchase their $185,000 target home according to the Monthly Income Affordability Worksheet criterion Olivia and Anthony qualify to purchase their $185,000 target home according to the Monthly Income Affordability Worksheet criterion