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Mortgage Affordability. Seth and Alexandra Moore of Elk Grove Village, Illinois have an annual income of $110,000 and want to buy a home. Currently, mort-

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Mortgage Affordability. Seth and Alexandra Moore of Elk Grove Village, Illinois have an annual income of $110,000 and want to buy a home. Currently, mort- gage rates are 5 percent. The Moores want to take out a mortgage for 30 years. Real estate taxes are estimated to be $4,800 per year for homes simi- lar to what they would like to buy, and homeowner's insurance would be about DO IT IN CLASS $1,500 per year. Page 276 (a) Using a 28 percent front-end ratio, what are the to- tal annual and monthly expenditures for which they would qualify: (b) Using a 36 percent back-end ratio, what monthly mortgage payment (including taxes and insur- ance) could they afford given that they have an automobile loan payment of $470, a student loan payment of $350, and credit card payments of $250? (Hint: Subtract these amounts from the to- tal monthly affordable payments for their income to determine the amount left over to spend on a mortgage.) (c) Using a 36 percent back-end ratio, if the Moores had zero debt, what monthly mortgage payment, (including taxes and insurance) could they afford

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