Martina and Anton are attempting to qualify for total mortgage financing of $1486,heating costs of $68,and they have a car loan payment of $346.What minimum gross monthly income will they need to qualify for both GDS ratio of 30 percent and TDS ratio of 40 percent?
A)$6333
B)$4750
C)$5180
D)$4953

Question

Quizplus · Accepted Answer

First, we need to calculate the maximum allowable housing expense based on GDS ratio. 
GDS = (Principal + Interest + Property Tax + Heating Cost) / Gross Monthly Income 
30% = (P+I+T+68) / GMI 
0.3GMI = P+I+T+68

Next, we need to calculate the maximum allowable total debt expenses based on TDS ratio. 
TDS = (Principal + Interest + Property Tax + Heating Cost + Other Debt Payments) / Gross Monthly Income 
40% = (P+I+T+68+346) / GMI 
0.4GMI = P+I+T+68+346 
0.4GMI = P+I+T+414

Subtracting the GDS equation from the TDS equation, we get: 
0.1GMI = 346 + 68 
0.1GMI = 414 
GMI = 4140

Therefore, the minimum gross monthly income required to qualify for both GDS ratio of 30 percent and TDS ratio of 40 percent is $5180. Hence, the answer is C.

Martina and Anton Are Attempting to Qualify for Total Mortgage