Next week, your friends Rajiv and Simone 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 $215,000. Given your knowledge of personal finance, theyve asked for your help in completing the Home Affordability Worksheet that follows.

To assist in the preparation of the worksheet, Rajiv and Simone also collected the following information:

Their financial records report a combined gross before-tax annual income of $85,000 and current (pre-mortgage) installment loan, credit card, and car loan debt of $1,240 per month.

Their property taxes and homeowners insurance policy are expected to cost $2,150 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 $50,500 that can be used to satisfy the homes 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%.

Given these results, which statement regarding Rajiv and Simones mortgage qualification process and the purchase of their $215,000 target home is true?

Rajiv and Simone qualify to purchase their $215,000 target home according to the Installment Debt Affordability Worksheet criterion

Rajiv and Simone do not qualify to purchase their $215,000 target home according to the Installment Debt Affordability Worksheet criterion.