Attempts $0\mathrm{.}4$

Do No Harm $\frac{0\mathrm{.}4}{2}$

$11.$ Can I afford this home? $-$ Part $1$

Can Aiden and Jesse Afford This Home Using the Monthly Income Loan Criterion?

Next week, your friends Aiden and Jesse want to apply to the Tenth National Bank for a mortgage loan. They are considering the purchase of a home that is expected to cost $$125,000.$ 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, Aiden and Jesse also collected the following information:

Their financial records report a combined gross before$-$tax annual income of $$105,000$ and current $($premortgage$)$ installment loan, credit card, and car loan debt of $$1,531$ per month.

Their property taxes and homeowner's insurance policy are expected to cost $$3,125$ per year.

Their best estimate of the interest rate on their mortgage is $7\mathrm{.}5\%,$ and they are interested in obtaining a $15-$year loan.

They have accumulated savings of $$32,500$ that can be used to satisfy the home's down payment and closing 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:

$\backslash$table$[[$Loan Maturity$],[$Interest Rate $(\%),10$ Years,$15$ Years,$20$ Years,$25$ Years,$30$ Years$],[5\mathrm{.}0,106\mathrm{.}0655,79\mathrm{.}0794,65\mathrm{.}9956,58\mathrm{.}4590,53\mathrm{.}6822],[5\mathrm{.}5,108\mathrm{.}5263,81\mathrm{.}7083,68\mathrm{.}7887,61\mathrm{.}4087,56\mathrm{.}7789],[6\mathrm{.}0,111\mathrm{.}0205,84\mathrm{.}3857,71\mathrm{.}6431,64\mathrm{.}4301,59\mathrm{.}9551],[6\mathrm{.}5,113\mathrm{.}5480,87\mathrm{.}1107,74\mathrm{.}5573,67\mathrm{.}5207,63\mathrm{.}2068],[7\mathrm{.}0,116\mathrm{.}1085,89\mathrm{.}8828,77\mathrm{.}5299,70\mathrm{.}6779,66\mathrm{.}5302],[7\mathrm{.}5,118\mathrm{.}7018,92\mathrm{.}7012,80\mathrm{.}5593,73\mathrm{.}8991,69\mathrm{.}9215],[8\mathrm{.}0,121\mathrm{.}3276,95\mathrm{.}565?,83,,]]$

A table of monthly payments $($necessary to repay a $$10,000$ loan$)$ follows:

$\backslash$table$[[$Loan Maturity$],[$Interest Rate $(\%),10$ Years,$15$ Years,$20$ Years,$25$ Years,$30$ Years,$],[5\mathrm{.}0,106\mathrm{.}0655,79\mathrm{.}0794,65\mathrm{.}9956,58\mathrm{.}4590,53\mathrm{.}6822,],[5\mathrm{.}5,108\mathrm{.}5263,81\mathrm{.}7083,68\mathrm{.}7887,61\mathrm{.}4087,56\mathrm{.}7789,],[6\mathrm{.}0,111\mathrm{.}0205,84\mathrm{.}3857,71\mathrm{.}6431,64\mathrm{.}4301,59\mathrm{.}9551,],[6\mathrm{.}5,113\mathrm{.}5480,87\mathrm{.}1107,74\mathrm{.}5573,67\mathrm{.}5207,63\mathrm{.}2068,],[7\mathrm{.}0,116\mathrm{.}1085,89\mathrm{.}8828,77\mathrm{.}5299,70\mathrm{.}6779,66\mathrm{.}5302,],[7\mathrm{.}5,118\mathrm{.}7018,92\mathrm{.}7012,80\mathrm{.}5593,73\mathrm{.}8991,69\mathrm{.}9215,],[8\mathrm{.}0,121\mathrm{.}3276,95\mathrm{.}5652,83\mathrm{.}6440,77\mathrm{.}1816,73\mathrm{.}3765,],[8\mathrm{.}5,123\mathrm{.}9857,98\mathrm{.}4740,86\mathrm{.}7823,80\mathrm{.}5227,76\mathrm{.}8913,],[9\mathrm{.}0,126\mathrm{.}6758,101\mathrm{.}4267,89\mathrm{.}9726,83\mathrm{.}9196,80\mathrm{.}4623,],[9\mathrm{.}5,129\mathrm{.}3976,104\mathrm{.}4225,93\mathrm{.}2131,87\mathrm{.}3697,84\mathrm{.}0854,],[10\mathrm{.}0,132\mathrm{.}1507,107\mathrm{.}4605,96\mathrm{.}5022,90\mathrm{.}8701,87\mathrm{.}7572,]]$

$($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.$)$

$($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.$)$

Home Affordability Worksheet

Based on Monthly Income

High Value

Low Value

Amount

Annual income

Monthly income

Lender's monthly income affordability ratio

$30\%$

$25\%$

Maximum monthly mortgage payment $($PITI$)$

Estimated monthly property tax and insurance payment

Maximum monthly loan payment $(P$ and I only$)$

Expected interest rate

$7\mathrm{.}5\%$

Planned loan maturity $($years$)$

$15$

Mortgage payment factor per $$10,000($from the Loan Maturity table$)$

Maximum loan based on monthly income

Funds Available for a Down Payment and Closing Costs

Required $(20\%)$ Down Payment

Maximum Purchase Price Based on Monthly Income

Given these results, which statement regarding Aiden and Jesse's mortgage qualification process and their purchase of their $$125,000$ target home is true?

Aiden and Jesse qualify to purchase their $$125,000$ target home according to the Monthly Income Affordability Worksheet criterion.

Aiden and Jesse do not qualify to purchase their $$125,000$ target home according to the Monthly Income Affordability Worksheet criterion.