Can I afford this home? $-$ Part $2$

Can Shen and Valerie afford this home using the installment debt loan criterion?

Next week, your friends Shen and Valerie want to apply to the Fourth Global 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.

To assist in the preparation of the worksheet, Shen and Valerie also collected the following information:

Their financial records report a combined gross before$-$tax annual income of $$125,000$ and current $($pre$-$mortgage$)$ 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 $$3,238$ 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 $$44,500$ that can be used to satiche the home's down payment and closing costs.

The lender requires a minimum $20\%$ down payment, and installme affordability ratios that range from a minimum of $33\%$ to a

maximum of $38\%.$

Given these results, which statement regarding Shen and Valerie's mortgage qualification process and the purchase of their $$185,000$ target home is

true?

Shen and Valerie do not qualify to purchase their $$185,000$ target home according to the Installment Debt Affordability Worksheet

criterion.

Shen and Valerie qualify to purchase their $$185,000$ target home according to the Installment Debt Affordability Worksheet criterion.