Amy and Paul are a young married couple with a cat, but no children. They are currently renting anapartment butare considering buying a house. They have created the following budget based on the house they hope to purchase.

a)The combined gross annual income of Amy and Paul is $64 800.

Calculate both the Gross Service Debt and Total Service Debt ratios. According to these ratios, is this house affordable for Amy and Paul?

Amy & Paul's Budget

Combined Net Income

$ 4,142.00

Expenses

Mortgage

$ 1,205.68

Property Tax

$ 265.98

House Insurance

$ 36.42

Electricity

$ 100.00

Natural Gas Heating

$ 50.00

Food

$ 600.00

TV/Phone/Internet

$ 125.00

Clothing

$ 200.00

Car Loan Payments

$ 745.52

Car Insurance

$ 212.63

Gasoline

$ 75.00

Life Insurance

$ 45.00

Travel Fund

$ 200.00

Gifts

$ 60.00

Total Expenses

$ 3,921.23

Income - Expenses

$ 220.77