Question

According to the Affordability Guidelines, if a family has an annual income of $62,000, what is the maximum mortgage amount the family could afford?

Answer 1

i read the guidelines in my book its very hard

Answer 2

It is different for different countries/states, but basically involves the family income, current debt level, etc. You will need to post the guidelines to get proper help. :(

Answer 3

guideline 1 says: the amount of the mortgage loan should not exceed three times the borrower's annual gross income
guideline 2 states: if a family has other significant family debt obligations such as car payments credit cards or student loans the family's monthly housing expenses including mortgage payment property taxes and private mortgage insurance should be limited to no more than 25% of their monthly gross income (income prior to deductions)

Answer 4

hope this helps @mathmate

Answer 5

Guideline 1 is simple, multiply the gross income by three, and that's one limit.

We are not given major debts, so we assume that there isn't any, hence guideline 2 reduces to mortgage payments must be less than 25% of gross income.
So you need to calculate the monthly payment (if interest rate and other details are given) for borrowed amount in guideline 1, and see if guideline 2 is satisfied.
Since no interest rate and other mortgage information is given, we assume that guideline 2 is satisfied.

To recap, with the given information, guideline 1 is the only one you need to satisfy.

Answer 6

ok so how do i go about performing the operation on the problem

Answer 7

Reread my last post, please!
Provide the amount that satisfies guideline 1.
Skip guideline 2 for lack of further information.

Answer 8

read so how do i calculate monthly payment

Answer 9

@MathMusician please help

Answer 10

@mathmate i am so stuck

Answer 11

You don't, because they did not give any details for mortgage.
Just use guideline #1.

Answer 12

so $62,000 x 3?

Answer 13

Yep! Simpler than you thought! lol
It's because we have no information whatsoever for guideline #2.