Sharry is interested in buying her first home. Currently her monthly gross income is $3,000. From this she makes a car payment of $240, a personal loan payment of $300 and a student loan payment of $85. Based on this information would a bank approve Sharry for a mortgage?

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Business

Ruby Edwards

12 April, 12:01

Sharry is interested in buying her first home. Currently her monthly gross income is $3,000. From this she makes a car payment of $240, a personal loan payment of $300 and a student loan payment of $85. Based on this information would a bank approve Sharry for a mortgage?

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Nielsen · Answer 1

Yes, bank would approve mortgage to Sharry

Explanation:

Mortgage payments are usually made of four things: principal, interest, taxes and insurance. Down limit for this payments monthly shouldn't exceed 28% of your gross monthly income. Therefore, Sherry's income after all the payments is: 3,000-240-300-85, which is equal to 2,375 dollars per month. Therefore, Sharry based on 28% rule, could afford mortgage as a form of monthly payments not higher than 665$. However, most lenders recommend your debt to income ration not to exceed 36% of gross monthly income. In Sharry's case this ration is 625/3000 equal to 20,83%. This means that the bank would approve mortgage to her