Mortgage affordability. Dhuha and Omar have an annual income of $183,408 and want to buy a...

Mortgage affordability. Dhuha and Omar have an annual income of $183,408 and want to buy a home. Currently, mortgage rates are 4.25 percent. They want to take out a mortgage for 30 years. Real estate taxes are estimated to be $9,764 per year for homes similar to what they would like to buy, and homeowner’s insurance would be about $2,504 per year.

Using a 28 percent front end ratio, what are the total monthly expenditures for which they would qualify? (5 points)

Using a 36 percent back end ratio, what monthly mortgage payment (including taxes and insurance) could they afford given that they have an automobile loan payment of $479, a student loan payment of $280, and credit card payments of $364? (5 points)

Expert Solution

jeff jeffy answered 10 months ago

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