5. Based on the front-end mortgage qualification rule, and assuming the Abed goes to the

maximum PITI level based on the rule, how much can he afford to borrow? Assume the

following:

He currently earns $66,000 per year.

The loan has a 4.5 percent annualized APR.

The loan is a thirty-year mortgage (fixed rate).

$200,000 loan amount.

$150 monthly HO insurance premium.

$300 monthly HO tax.

a. 215,124

b. $283,540

c. $303,936

d. $390,775

6. Abed has obtained several loan offers from banks, credit unions, and mortgage brokers.

Assuming he does not qualify for a VA or FHA loan at this time, which of the following

borrowing strategies will enable him to pay the least amount of interest over the course of the

loan? Assume the purchase price of the home is $200,000?

a. Obtain a thirty-year fixed rate 4.5 percent APR mortgage with a loan to value ratio of 80

percent.

b. Obtain a thirty-year fixed rate 4.5 percent APR mortgage with a loan to value ratio of 50

percent.

c. Obtain a fifteen-year fixed rate 3.9 percent APR mortgage with a loan to value ratio of 100

percent.

d. Obtain a twenty-year fixed rate 4.0 percent APR mortgage with a loan to value ratio of 90

percent.