5). Annual income = 300,000 so monthly income = 300,000/12 = 25,000
Front end DTI = (mortgage payment + property tax + insurance)/monthly gross income
Back end DTI = (mortgage payment + property tax + insurance + student loan)/monthly gross income
Using front end DTI, mortgage payment = front end DTI*monthly gross income - property tax - insurance
mortgage payment = (28%*25,000) - 140 - 70 = 6,790
Using back end DTI, mortgage payment = back end DTI*monthly gross income - property tax - insurance - student loan
mortgage payment = (36%*25,000) - 140 - 70 -178 = 8,612
In order to satisfy both limits, the lower limit has to be satisfied, so the maximum monthly mortgage payment, he can pay is $6,790.
6). As calculated in Ans.5) above, the maximum monthly mortgage payment is $6,790.
PMT = -6,790; N = 30*12 = 360; rate = 4.5%/12 = 0.375%, solve for PV.
Maximum loan amount = $1,340,082.27
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