Math Problem?
Submitted : 20180614 07:59:54 Popularity:
Tags: Math Problem
Erica makes $4,840 monthly. What is the maximum loan she can take out on a house?
A. $58,080
B. $116,160
C. $100,000
D. $87,120
B. $116,160
Depends on How much collateral and / or money does she have
In the USA, on a low down payment FHA 30year fixed rate loan, if no notable other debt payments current APR 5.568 and 3.5% minimum down payment. $4,840 monthly gross allows $1597.20 PITIH (Principal, Interest, Taxes, Insurance, HOA)
Looking at the largest loan of the 4 choices, $116,160 on home of $120,373 $4213 down payment plus closing costs.
Estimating $1565 annual property tax at 1.3% of value (may be higher or lower) $130/month
Estimating $480 annual homeowners insurance at $24/month
$664.51 Principal and interest
http://bretwhissel.net/cgibin/amortize
HOA estimate $25/Month
$130+24+$665+25 = $844 per month, well below the $1597
If those are the only choices, than B, because it is well below what banks would lend in the USA.
A $200,000 house with 7000 down payment and $193,000 borrowed
$2600 tax as $217/month
$55/mo Home insurance
$25 hoa
$1104 P+I
1104 + 25 + 55 + 217 = 1401 is still quite affordable.
But, it depends upon Erica's location.
At least B as the largest number
depends on a lot of other things, not just on how much she earns.
If it is twice annual salary Answer B
If it is 1.5 times annual salary Answer D
Trick question, none of the above since you are never going to make $4840 a month.


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