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 Fourth Global 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, 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 $$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$)$

Based on Monthly Income High Value Low Value Amount

$1.$ Annual income

$2.$ Monthly income

$3.$ Lender$$s monthly income affordability ratio $30\%25\%$

$4.$ Maximum monthly mortgage payment $($PITI$)$

$5.$ Estimated monthly property tax and insurance payment

$6.$ Maximum monthly loan payment $($P and I only$)$

$7.$ Expected interest rate $7\mathrm{.}5\%$

$8.$ Planned loan maturity $($years$)15$

$9.$ 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

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

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

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