Suppose you are applying for a 30-year mortgage loan and your gross income is $100,000 per year. Suppose that annual property taxes are fixed at $5,000 per year, and current mortgage rates are at 5%. If a bank requires a gross debt service ratio of 25%, a) What monthly mortgage payment can you afford? b) What size of mortgage loan can you afford? c) If you make a 20% down payment on the house, what house value can you afford?

Now suppose a different bank requires a gross debt service ratio of 30%. In this case,

d) What monthly mortgage payment can you afford? e) What size of mortgage loan can you afford? f) If you make a 20% down payment on the house, what house value can you afford?