Can Clancy and Eileen afford this home using the installment debt loan criterion? Next week, your friends Clancy and Eileen want to apply to the Third Universal Bank for a mortgage loan. They are considering the purchase of a home that is expected to cost $215,000. Given your knowledge of personal finance, they've asked for your help in completing the Home Affordability Worksheet that follows. I To assist in the preparation of the worksheet, Clancy and Eileen also collected the following information: Their financial records report a combined gross before-tax annual income of $85,000 and current (pre-mortgage) installment loan, credit card, and car loan debt of $1,240 per month. Their property taxes and homeowner's insurance policy are expected to cost $2,150 per year. . Their best estimate of the interest rate on their mortgage is 7.5%, and they are interested in obtaining a 15-year loan. They have accumulated savings of $50,500 that can be used to satisfy the home's down payment and closing costs. The lender requires a minimum 20% down payment, and installment loan affordability ratios that range from a minimum of 33% to a maximum of 38%. Use either the table of monthly payments (necessary to repay a $10,000 loan), your financial calculator, or the maximum affordable mortgage loan formula to complete the following home affordability worksheet. (Note: When completing the form, round each dollar amount to the nearest whole dollar. Unless labeled differently, all of the following values represent dollar amounts. Also, some values calculated or used in the upper section of the table may also be used in the lower section. Round your percentage answer to two decimal places.) 3 Monthly Payments Factors Maximum Affordable Mortgage Loan Formula Loan Maturity 15 Years 20 Years 10 Years 30 Years Interest Rate (%) 5.0 25 Years 58.4590 106.0655 79.0794 65.9956 53.6822 5.5 108.5263 81.7083 68.7987 61.4087 56.7789 6.0 111.0205 84.3857 71.6431 64.4301 59.9551 6.5 113.5480 87.1107 74.5573 67.5207 63.2068 7.0 116.1085 89.8828 77.5299 70.6779 66.5302 7.5 118.7018 92.7012 80.5593 73.8991 59.9215 8.0 121.3276 95.5652 83.6440 77.1816 73.3765 8.5 123.9857 98.4740 86.7823 80.5227 76.8913 9.0 126.6758 101.4267 89.9726 83.9196 80.4623 9.5 129.3976 104.4225 93.2131 87.3697 84.0854 10.0 132.1507 107.4605 96.5022 90.8701 87.7572 High Value Low Value Amount 38% 33% Home Affordability Worksheet Based on Installment Payments and Monthly Income 1. Annual income 2. Monthly income 3. Existing monthly installment payments 4. Existing monthly installment payments as percentage of monthly income (%) 5. Lender's monthly installment loan affordability ratio 6. Maximum amount of total affordable installment debt 7. Maximum monthly mortgage payment (PITI) affordable based on installment loan ratio 8. Estimated monthly property tax and insurance payment 9. Maximum monthly loan payment (P and I only) 10. Expected interest rate 11. Planned loan maturity (years) 12. Mortgage payment factor per $10,000 (from the Loan Maturity table) $ 13. Maximum loan based on mortgage payment factor (from the Loan Maturity table) 14. Required (20%) down payment ) 15. Maximum home price based on installment loan ratio 7.5% 15 Given these results, which statement regarding Clancy and Eileen's mortgage qualification process and the purchase of their $215,000 target home is true? Clancy and Eileen qualify to purchase their $215,000 target home according to the Installment Debt Affordability Worksheet criterion O Clancy and Eileen do not qualify to purchase their $215,000 target home according to the Installment Debt Affordability Worksheet criterion. Can Clancy and Eileen afford this home using the installment debt loan criterion? Next week, your friends Clancy and Eileen want to apply to the Third Universal Bank for a mortgage loan. They are considering the purchase of a home that is expected to cost $215,000. Given your knowledge of personal finance, they've asked for your help in completing the Home Affordability Worksheet that follows. I To assist in the preparation of the worksheet, Clancy and Eileen also collected the following information: Their financial records report a combined gross before-tax annual income of $85,000 and current (pre-mortgage) installment loan, credit card, and car loan debt of $1,240 per month. Their property taxes and homeowner's insurance policy are expected to cost $2,150 per year. . Their best estimate of the interest rate on their mortgage is 7.5%, and they are interested in obtaining a 15-year loan. They have accumulated savings of $50,500 that can be used to satisfy the home's down payment and closing costs. The lender requires a minimum 20% down payment, and installment loan affordability ratios that range from a minimum of 33% to a maximum of 38%. Use either the table of monthly payments (necessary to repay a $10,000 loan), your financial calculator, or the maximum affordable mortgage loan formula to complete the following home affordability worksheet. (Note: When completing the form, round each dollar amount to the nearest whole dollar. Unless labeled differently, all of the following values represent dollar amounts. Also, some values calculated or used in the upper section of the table may also be used in the lower section. Round your percentage answer to two decimal places.) 3 Monthly Payments Factors Maximum Affordable Mortgage Loan Formula Loan Maturity 15 Years 20 Years 10 Years 30 Years Interest Rate (%) 5.0 25 Years 58.4590 106.0655 79.0794 65.9956 53.6822 5.5 108.5263 81.7083 68.7987 61.4087 56.7789 6.0 111.0205 84.3857 71.6431 64.4301 59.9551 6.5 113.5480 87.1107 74.5573 67.5207 63.2068 7.0 116.1085 89.8828 77.5299 70.6779 66.5302 7.5 118.7018 92.7012 80.5593 73.8991 59.9215 8.0 121.3276 95.5652 83.6440 77.1816 73.3765 8.5 123.9857 98.4740 86.7823 80.5227 76.8913 9.0 126.6758 101.4267 89.9726 83.9196 80.4623 9.5 129.3976 104.4225 93.2131 87.3697 84.0854 10.0 132.1507 107.4605 96.5022 90.8701 87.7572 High Value Low Value Amount 38% 33% Home Affordability Worksheet Based on Installment Payments and Monthly Income 1. Annual income 2. Monthly income 3. Existing monthly installment payments 4. Existing monthly installment payments as percentage of monthly income (%) 5. Lender's monthly installment loan affordability ratio 6. Maximum amount of total affordable installment debt 7. Maximum monthly mortgage payment (PITI) affordable based on installment loan ratio 8. Estimated monthly property tax and insurance payment 9. Maximum monthly loan payment (P and I only) 10. Expected interest rate 11. Planned loan maturity (years) 12. Mortgage payment factor per $10,000 (from the Loan Maturity table) $ 13. Maximum loan based on mortgage payment factor (from the Loan Maturity table) 14. Required (20%) down payment ) 15. Maximum home price based on installment loan ratio 7.5% 15 Given these results, which statement regarding Clancy and Eileen's mortgage qualification process and the purchase of their $215,000 target home is true? Clancy and Eileen qualify to purchase their $215,000 target home according to the Installment Debt Affordability Worksheet criterion O Clancy and Eileen do not qualify to purchase their $215,000 target home according to the Installment Debt Affordability Worksheet criterion