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In: Finance

Silvia and Jason would like to purchase a home with the following monthly expenses: ​ Principal...

Silvia and Jason would like to purchase a home with the following monthly expenses:
​
Principal and interest
$980
Homeowner's insurance
$350
Real estate taxes
$265
Utilities
$205
​
The couple needs to have an annual gross income of at least ____ in order to qualify for a loan if the front-end ratio requirement is 26 percent.

Solutions

Expert Solution

Front end ratio = (Annual Housing Expenses / Annual gross income)*100

Monthly Housing Expenses = $980+$350+$265+$205=$1800

Total annual housing expenses = $1800*12 = $21600

hence

26= ($21600 / Annual gross income)*100

=>Annual gross income = $21600/0.26 = $83076.92 (round off)

The couple needs to have an annual gross income of at least $83076.92 in order to qualify for a loan if the front-end ratio requirement is 26 percent.

jeff jeffy answered 2 years ago
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