Jane Doe earns $58,800 per year and has applied for a (n) $99,000, 30-year mortgage at 9 percent interest, paid monthly. Property taxes on the house are expected to be $6,900 per year. If her bank requires a gross debt service ratio of no more than 30 percent, will Jane be able to obtain the mortgage

Question

Business

Casey Monroe

3 September, 04:41

Jane Doe earns $58,800 per year and has applied for a (n) $99,000, 30-year mortgage at 9 percent interest, paid monthly. Property taxes on the house are expected to be $6,900 per year. If her bank requires a gross debt service ratio of no more than 30 percent, will Jane be able to obtain the mortgage

+3

Answers (1)

Know the Answer?

Jazlene Espinoza · Answer 1

GDS ratio is 28.12% and is less than the maximum of 30%, hence Jane would be able to get the mortgage

Explanation:

The gross debt service ratio is a measure of the ease with which mortgage holders can repay their housing loan. It compares the yearly property obligations with the yearly income of the mortgage holder.

Gross Debt Service ratio=yearly obligations/yearly income

yearly obligations=property taxes+yearly mortgage repayment

property taxes is $6,900

mortgage repayment=pmt (rate, nper,-pv, fv)

rate is 9%

nper is the duration mortgage of 30 years

pv is the present value of mortgage

fv is future value of mortgage, it is not known, hence taken as zero

=pmt (9%,30,-99000,0) = $9,636.30

yearly obligations=$6,900+$9,636.30=$ 16,536.30

GDS = 16,536.30/58,800=28.12%