Using Figure 8.7 (screenshot added below) as a guide, calculate the maximum mortgage you would qualify for using the following assumptions for all three methods: Annual gross income of $120,000 Anticipated monthly real estate taxes and insurance = $750 Anticipated interest rate on the mortgage loan = 5.5% Mortgage maturity = 30 years Current non-mortgage debt payments = $500 Funds available for down payment and closing costs = $75,000 Estimated closing costs of $15,000 Minimum acceptable down payment 20% Please indicate your answers for each step in each of the following methods and indicate the maximum mortgage a lender would offer under: Method 1 "The Ability to Pay PITI Ratio" mortgage amount Method 2 "The Ability to Pay PITI Plus Other Fixed Monthly Payments Ratio" mortgage amount Method 3 "The 80 Percent of the Appraised Value of the House" mortgage amount Instead of the crossed-out sections in the sheet attached, use PV, FV, PMT, I/Y, and N to solve with a Financial Calculator

METHOD 1-The Ability to Pay PITI Ratio ( PI= Principal and Interest, TI= Taxes and Insurance) (Lenders limit your monthly housing costs, as measured by PITI, to 28% of your gross monthly income.) Your Numbers a. Monthly income (annual income divided by 12 ) b. Times 28%($5,4170.28)= PIT limit c. Less: estimated monthly real estate taxes and insurance payments of $200 per month (T) d. Equals your maximum monthly mortgage payment (PI) Steps to determine the maximum mortgage loan level: UE YoR STEP 1: Using Tabl 8.1, detg/mine monthly mortgage payment with a 30 -yegmzurity and an 8% interest rate STEP 2: Divide the max (um monthly mortgage payment (line d) by of the morfage ($10,00) ($1,317.$73.78)$1,000 METHOD 2-The Ability to Pay PITI Plus Other Fixed Monthly Payments Ratio (Lenders use 36% of your total current monthly fixed payments to determine the amount of your loan.) Your Numbers e. Monthly income (annual income divided by 12 ) f. Times 36%($5,4170.36)= PITI limit i. Equals your maximum monthly mortgage payment (PI) =$1,350 Steps to determine thg maximum mortgape loan level: VSE YOC STEP 1: Using hole 8.1, dete/mine monthly mortgage payment with a 30 xear mat/rity and an 8% interest rate the monthly motgage payment (Step 1) and multiply by the amgutilis ($1,350$73.78)$0,000 METHOD 3-The "80 Percent of the Appraised Value of the House" Rule (You pay 20% of the appraised value and can borrow 80% of the appraised value of the house.) j. Funds available for down payment and closing costs k. Less closing costs I. Equals funds available for the down payment (the 20\%) m. Times 4 equals the maximum mortgage level (the 80% ) Conclusion: maximum mortgage level for which you will qualify (the lowest of the amounts using Methods 1, 2, and 3): =$179,477