You would like to purchase a home and are interested to find out how much you...

You would like to purchase a home and are interested to find out how much you can borrow. When your lender calculates your debt to income ratio, he determines that your maximum monthly payment can be no more than $4,349. You would like to have a 30 year fully- amortizing loan and the interest rate offered on such a loan is currently 3%. Given these constraints, what is the largest loan you can obtain? Round your answer to the nearest cent (e.g. if your answer is $600,000.0134, enter 600000.01).

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Expert Solution

Use PV function in EXCEL to find the largest loan you can obtain.

=PV(rate,nper,pmt,fv,type)

rate=3%/12=0.25%

nper=30 years*12=360 months

pmt=monthly payment=4349

fv=0

=PV(0.25%,360,4349,0,0)=$1031536.62

the largest loan you can obtain=$1031536.62

jeff jeffy answered 1 year ago

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