Can Megan and Larry afford this home using the installment debt loan criterion? Next week, your friends Megan and Larry want to apply to the Fifth State Bank for a mortgage loan. They are considering the purchase of a home that is expected to cost $155,000. 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, Megan and Larry also collected the following information: Their financial records report a combined gross before-tax annual income of $105,000 and current (pre-mortgage) 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 $1,550 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 $38,500 that can be used to satisfy the home's down payment and closing costs. The lender requires a minimum 20% down payment, and installment loan affordability ratios that range from a minimum of 33% to a maximum of 38%. Home Affordability Worksheet Based on Installment Payments and Monthly Income High Value Low Value Amount 1. Annual income % 38% 33% 2. Monthly income 3. Existing monthly installment payments 4. Existing monthly installment payments as percentage of monthly income (%) 5. Lender's monthly installment loan affordability ratio 6. Maximum amount of total affordable installment debt 7. Maximum monthly mortgage payment (PITI) affordable based on installment loan ratio 8. Estimated monthly property tax and insurance payment 9. Maximum monthly loan payment (P and I only) 7.5% 10. Expected interest rate 11. Planned loan maturity (years) 15 12. Maximum loan 13. Required (20%) down payment 14. Maximum home price based on installment loan ratio Given these results, which statement regarding Megan and Larry's mortgage qualification process and the purchase of their $ 155,000 target home is true? Megan and Larry do not qualify to purchase their $155,000 target home according to the Installment Debt Affordability Worksheet criterion. Megan and Larry qualify to purchase their $155,000 target home according to the Installment Debt Affordability Worksheet criterion