Question

Enrique and Rosie are getting prequalified for a VA mortgage loan. Enrique earns $4,550 a month and Rosie earns $5,200. Based on the price home they hope to buy, the lender estimates property taxes at $2,780 a year and insurance at $750. Enrique has a car payment of $391; Rosie's is $275. They have a furniture loan with a monthly payment of $318, and Enrique pays child support to his ex-wife of $1,350 a month. They each have a minimum credit card payment of $25. Based on a back-end ratio of 41%, what is the maximum monthly payment they qualify for?​

Answer 1

Explanation:To calculate the maximum monthly payment they qualify for, we need to first calculate their total monthly income and their total monthly debt payments.

Total Monthly Income:

Enrique's income: $4,550

Rosie's income: $5,200

Total monthly income: $4,550 + $5,200 = $9,750

Total Monthly Debt Payments:

Enrique's car payment: $391

Rosie's car payment: $275

Furniture loan: $318

Child support: $1,350

Minimum credit card payments: $25 + $25 = $50

Total monthly debt payments: $391 + $275 + $318 + $1,350 + $50 = $2,384

Now, we can calculate the maximum monthly payment they qualify for using the back-end ratio of 41%:

Maximum Monthly Payment = (Total Monthly Income * 41%) - Total Monthly Debt Payments

Maximum Monthly Payment = ($9,750 * 0.41) - $2,384

Maximum Monthly Payment = $3,997.50 - $2,384

Maximum Monthly Payment = $1,613.50

Therefore, based on a back-end ratio of 41%, Enrique and Rosie qualify for a maximum monthly payment of $1,613.50.