luis wants to buy a home priced at $315,000. he plans to finance this amount less the down payment required…

luis wants to buy a home priced at $315,000. he plans to finance this amount less the down payment required. his mortgage payment would then be $2100. luis has an annual income of $91,500 and $65,000 in savings. luis has a car payment of $370, a student loan payment of $165 and a credit card payment of $45. use a 20% down payment and the 28/36 ratio to determine if luis is eligible for a loan. what would you advise him to do if he is not eligible? a. luis is eligible for a home loan; he meets all of the requirements. b. luis is not eligible for a home loan; he should continue to save for a down payment. c. luis is not eligible for a loan; he should look for a cheaper house. d. luis is not eligible for a loan; he should reduce his recurring debt. please select the best answer from the choices provided

luis wants to buy a home priced at $315,000. he plans to finance this amount less the down payment required. his mortgage payment would then be $2100. luis has an annual income of $91,500 and $65,000 in savings. luis has a car payment of $370, a student loan payment of $165 and a credit card payment of $45. use a 20% down payment and the 28/36 ratio to determine if luis is eligible for a loan. what would you advise him to do if he is not eligible? a. luis is eligible for a home loan; he meets all of the requirements. b. luis is not eligible for a home loan; he should continue to save for a down payment. c. luis is not eligible for a loan; he should look for a cheaper house. d. luis is not eligible for a loan; he should reduce his recurring debt. please select the best answer from the choices provided

Answer

Explanation:

Step1: Calculate the down - payment amount

The home price is $315,000. A 20% down - payment means the down - payment amount is $315000\times0.2=$63000$. Luis has $65,000 in savings, so he can afford the down - payment.

Step2: Calculate Luis's monthly income

His annual income is $91,500. So his monthly income is $\frac{91500}{12}=$7625$.

Step3: Calculate the 28% of monthly income (front - end ratio)

The maximum allowable mortgage payment (28% of monthly income) is $0.28\times7625 = $2135$. His proposed mortgage payment is $2100$, which is less than $2135$.

Step4: Calculate total monthly debt

His car payment is $370$, student loan payment is $165$, credit card payment is $45$, and mortgage payment is $2100$. So total monthly debt is $2100 + 370+165 + 45=$2680$.

Step5: Calculate the 36% of monthly income (back - end ratio)

36% of his monthly income is $0.36\times7625=$2745$. His total monthly debt of $2680$ is less than $2745$.

Answer:

A. Luis is eligible for a home loan; he meets all of the requirements.