Question

If a lender requires that mortgage payments cannot exceed 30% of gross income and total loan payments cannot exceed 45% of gross income, calculate the monthly payment for which a person with the following financial data could qualify.

Gross Income 6,500
Stereo loan payment 300
Furniture loan payment 145
Auto loan 650

Answer 1

Let mortgage payment be x
Total loan payments=300+145+650+x
Total loan payments/gross income<=45%
=>(1095+x)/6500<=45%
=>x<=1830

Mortgage payments/gross income=x/6500
Mortgage payments/gross income<=30%
=>x/6500<=30%
=>x<=1950

Hence, monthly payment should be minimum of the above two i.e., 1830