If your annual gross income is $62,000 and you have one monthly car payment of $335 and a monthly student loan payment of $225, what is the maximum house payment you can afford. consider a standard 28% front-end ratio and a 36% back-end ratio. also, to complete your calculation, the annual property tax will be $3,600 and the annual homeowner's premium will be $360.

The maximum house payment than can be afforded = $970

Step-by-step explanation:

The front-end ratio = 28%

The front end ratio limits housing-related expenses to 28% × $62,000

                                                                                         = 0.28 × $62,000

                                                                                         = $17,360 per year

Annual property tax = $3600

Annual homeowner's premium = $360

So the amount that can be spent on mortgage debt = expense limit - annual premium of homeowner - annual property tax

⇒ Amount that can be spent on mortgage = 17360 - 3600 - 360

                                                                       = $13400 per year

The back-end ratio limits the total of all debt to 36% × $62,000

                                                                              = 0.36 × 62,000

                                                                              = $22,320 per year

To find allowable additional debt : Subtract the payments which are already made

⇒ Allowable payment amount = 22320 - 12 × (335 +225) - 3600 - 360

                                                   = $11,640

The back end ratio limit is lower than the front end ratio limit, So the monthly house payment will be limited by the back end ratio.

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step-by-step explanation: