Question you are applying for a conventional mortgage from, Ask an Expert

Finance

Question: You are applying for a conventional mortgage from the Americana Bank. Your monthly gross income is $3,500, and the bank uses the 28% housing expense ratio guideline.

a. What is the highest PITI for which you can qualify? Hint: Solve the housing expense ratio formula for PITI. Remember, this is an application of the percentage formula, Portion 5 Rate 3 Base, where PITI is the portion, the expense ratio is the rate, and your monthly gross income is the base.

b. Based on your answer from part a, if you are applying for a 30-year, 9% mortgage and the taxes and insurance portion of PITI is $175 per month, use Table 14-1 to calculate the size of the mortgage for which you qualify. Hint: Subtract TI from PITI. Divide the PI by the appropriate table factor to determine the number of $1,000s for which you qualify.

c. Based on your answer from part b, if you are planning on a 20% down payment, what is the most expensive house you can afford? Hint: Use the percentage formula again. The purchase price of the house is the base, the amount financed is the portion, and the percent financed is the rate.

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92763652

Have any Question?Write your Review or question?

Related Questions in Basic Finance

Suppose you know that a companys stock currently sells for

Suppose you know that a company's stock currently sells for $60 per share and the required return on the stock is 14 percent. You also know that the total return on the stock is evenly divided between a capital gain yiel ...

Your company is considering a new project that will require

Your Company is considering a new project that will require $950,000 of new equipment at the start of the project. The equipment will have a depreciable life of 9 years and will be depreciated to a book value of $297,500 ...

Eggsinc reported earnings available to common stock of

Eggs,Inc. reported earnings available to common stock of $4200000 last year. From these earnings, the company paid a dividend of $1.26 on each of its 1000000 common shares outstanding. The capital structure of the compan ...

Do we need to separate bid vwap and ask vwap in calculating

Do we need to separate bid VWAP and ask VWAP in calculating VWAP? For example, for my portfolio VWAP, i would separate all the bids and asks and calculating bid VWAP and ask VWAP.

Certain financial ratios for elizabeth arden for its most

Certain financial ratios for Elizabeth Arden for its most recent year below, along with the average ratios for its industry. Based on those ratio a. Does Arden seem to prefer to finance its assets with debt or with equit ...

What are the ways that it can help comply with legal

What are the ways that IT can help comply with legal requirements and social responsibilities surrounding the sales of alcohol?

Suppose you are going to receive 14100 per year for six

Suppose you are going to receive $14,100 per year for six years. The appropriate interest rate is 6.9 percent. a. What is the present value of the payments if they are in the form of an ordinary annuity? (Do not round i ...

On january 11998 the total assets of the mccue company were

On January 1,1998, the total assets of the McCue company were $270 million. The first present capital structure, which follows, is considered optimal. Assume that they have no short-term debt. Long-term debt ...

Rose berry is attempting to evaluate her expected return

Rose Berry is attempting to evaluate her expected return over the coming year. She holds shares in the following two companies, 60% in A and the rest in B. Expected Return State Probability of State Company A Company B B ...

Burke tires just paid a dividend of d0 134 analysts expect

Burke Tires just paid a dividend of D0 = $1.34. Analysts expect the company's dividend to grow by 30% this year, by 19.25% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert