Question

The most Josua can afford to pay per year in mortgage payments is $14,000,

and his credit score is currently 498. According to the following table for a
$150,000 mortgage, by how many points would he need to improve his credit
score in order to take a mortgage for $150,000?
OA. 2 points
OB. 122 points
O C. 177 points
D. 62 points
FICO
Score
720-850
700-719
675-899
620-674
560-619
500-559
Monthly
Payment
Interest
Rate
5.59%
$860
5.71%
$872
6.25%
$924
7.40%
$1,039
8.53%
$1,157
9.29% $1,238

Answer 1

D. 62 points

Explanation:

You want to know the improvement in credit score needed so that Josua can borrow $150,000 with payments less than $14000 per year.

Monthly payment

Josua can afford 12 monthly payments of $14,000/12 = $1166.67. According to the rate table, the monthly payment will be less than this amount if Josua has a credit score of 560 or better. With a score of 560, his payment would be $1157.

Score improvement

To get his score up to 560, he needs to improve it by ...

560 -498 = 62 . . . . points

He would need to improve his credit by 62 points.

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