Question

A client has been a paralegal for five years and earns $56,400 per year. She has been working part-time at an ice cream parlor for the past few summers to save for her first home. Now that she has saved $12,000 toward a down payment, she no longer needs to work a second job. In the next three months, the client would like to buy a single-family home near a good school for less than $150,000.

What is this client's maximum mortgage payment if the lender's housing ratio is 28 percent (round to the nearest
dollar)?

Answer 1

To determine the client's maximum mortgage payment, we will use the lender's housing ratio of 28 percent. The client's maximum mortgage payment should be $12,432.

Step-by-step explanation:

To determine the client's maximum mortgage payment, we will use the lender's housing ratio of 28 percent. This means that the client's mortgage payment should not exceed 28 percent of her income. Let's calculate the maximum mortgage payment:

Step 1: Calculate the client's annual income after working part-time at the ice cream parlor:
Annual income = $56,400 - $12,000 = $44,400

Step 2: Calculate the maximum mortgage payment:
Maximum mortgage payment = (28/100) * $44,400 = $12,432

Therefore, the client's maximum mortgage payment should be $12,432.

The client, who has been a paralegal earning $56,400 per year, wants to know her maximum mortgage payment considering a lender's housing ratio of 28 percent. First, we need to calculate her monthly income by dividing her annual salary by 12.

Monthly income = $56,400 / 12 = $4,700.

Then, we apply the 28 percent housing ratio to determine her maximum mortgage payment.

Maximum mortgage payment = 28% of $4,700 = 0.28 * $4,700 = $1,316.

Therefore, the client's maximum mortgage payment should be rounded to $1,316 per month.