446 Chapter 10 Consumer Mathematics
E. Qualifying for a Mortgage
- True or false: If you pass both the 28% and 36% tests, you qualify for the loan.
- True of false: If you pass either the 28% or the 36% test and meet all other qualifi cation requirements (credit,
employment history, etc.), you qualify for the loan. - True or false: Every mortgage lender uses the 28% and 36% tests.
- True or false: If you qualify for a mortgage loan, that means you can comfortably afford the house payments.
- Lilianna makes $45,000 per year. She wants to buy a house on which the total monthly PITI would be $1,297.55. Her
only other long-term debt payments are for a car loan on which the monthly payment is $255.19. Does she pass the
28% test? Does she pass the 36% test? Assuming that everything else with her application is acceptable, would she
qualify for the loan? - The Sumners earn a combined annual income of $89,700. Would they pass the 28% test for a property for which the
monthly PITI would be $1,799.23? If their total additional long-term debt payments total $855.92, would they pass the
36% test? - If Aaron and Cienna from Exercise 13 have a combined annual income of $82,500, would they pass the 28% test? If
their long-term debt payments total $355.99, would they pass the 36% test? Assuming everything else is OK, would
they qualify for the mortgage? - Bruce and Elena earn a combined $57,840 per year. They have two car loans, both of which have more than a year left
to go, with payments totaling $464.25. They have student loan payments totaling $122.75, and they have 6 months
left to pay on a loan for some furniture on which the payment is $125 monthly. The minimum monthly payments on
their credit cards total $80.
They want to buy a house for $117,300. They plan to make a 5% down payment, and fi nance the rest with a 30-year
fi xed-rate mortgage at 7.3%. Property taxes amount to $1,856 per year, and homeowners’ insurance premiums are
$762 annually. PMI would be $47 a month.
They have applied for a mortgage with a lender that uses the 28% and 36% tests.
a. Calculate their PITI for this loan.
b. Calculate 28% of their monthly gross income. Do they pass the 28% test?
c. Calculate their total monthly long-term debt payments, and calculate 36% of their monthly gross income. Do they
pass the 36% test?
d. Assuming everything else is OK, would they get the mortgage loan?F. Up-Front Expenses
- Herb wants to buy a house for $192,800. He is planning on making a 5% down payment, and closing costs will amount
to $3,170. Annual property taxes are $5,155 and annual homeowners’ insurance premiums will total $1,250. How
much money will he need up front?