Inputs: Purchase Price = $200,000, Down Payment = $10,000 (5%), Start Interest Rates = 4%, Loan...

Inputs: Purchase Price = $200,000, Down Payment = $10,000 (5%),

Start Interest Rates = 4%, Loan Term = 30 years, Monthly Liabilities = $450 (car loan),

Under Monthly Housing Expense input Real Estate Taxes + $3,000 annually, Hazard Insurance = $800 annually, Dues or Fees = $0. Click “Calculate”. Click “View Report”.

What is the required annual income required for a 4% loan? ___________

What is the required annual income required for a 5% loan? ___________

What is the Private Mortgage Insurance (PMI) monthly payment?

Change the loan term to 15 years, keeping all other amounts the same.

What is the required annual income required for a 4% loan? ___________

What is the required annual income required for a 5% loan? ___________

From the report can you provide the maximum debt to income ratio for the PITI (Principal, Interest, Taxes, Insurance)?

D/I = ____%

Solutions

Expert Solution

1. The required annual income required for a 4% loan for a loan term of 30 years is $52,875.

2. The required annual income required for a 5% loan for a loan term of 30 years is $56,638.

3. Private Mortgage insurance (PMI) costs between 0.5% and 1% of the mortgage annually and is usually included in the monthly payment. PMI can be removed once a borrower pays down enough of the mortgage's principal.

4. The required annual income required for a 4% loan for a loan term of 15 years is $70,053

5. The required annual income required for a 5% loan for a loan term of 15 years is $74,215

Debt to income ratio:

A debt to income ratio is a comparison of monthly debt to income. Values less than 43% are acceptable , but 36% or less is preffered by lenders. For a mortgage loan, mortgage lenders generally follow a guideline of 28/36 when it comes to debt-to-incomes ratios. The numbers 28 and 36 are the ideal maximum numbers many lenders want when extending a mortgage loan.

Debt to income ratio = Total fixed monthly expenses / gross monthly income

ekkarill92 answered 1 year ago

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