Question

The client's gross monthly income is $4167 and the monthly debts are $435. What is the maximum mortgage payment (rounded to the nearest dollar) for which this client would qualify using a standard conventional loan?

Answer 1

To determine the maximum mortgage payment for which the client would qualify using a standard conventional loan, divide the monthly debts by the gross monthly income to calculate the debt-to-income ratio (DTI). Multiply the gross monthly income by 43% and subtract the monthly debts to get the maximum mortgage payment. In this case, the maximum mortgage payment is $100.99 (rounded to the nearest dollar).

Step-by-step explanation:

To determine the maximum mortgage payment for which the client would qualify, we need to calculate the debt-to-income ratio (DTI).

1. First, we need to calculate the monthly gross income by dividing the annual gross income by 12. In this case, it would be $4167 / 12 = $347.25.
2. Next, we calculate the DTI by dividing the monthly debts by the gross monthly income. In this case, it would be $435 / $347.25 = 1.25.
3. A standard conventional loan typically allows a maximum DTI of 43%. To calculate the maximum mortgage payment, we multiply the gross monthly income by 43% and subtract the monthly debts. In this case, it would be ($347.25 * 0.43) - $435 = $100.99.

Therefore, the maximum mortgage payment for which this client would qualify using a standard conventional loan is $100.99 (rounded to the nearest dollar).