Martina and Anton are attempting to qualify for total mortgage financing of $1486, heating costs of $68, and 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?

Question

Quizplus · Accepted Answer

To calculate the GDS ratio, we need to add up the principal, interest, taxes, and heating (PITH) costs and divide them by the gross monthly income.

GDS ratio = (PITH)/(gross monthly income)

Substituting the given values, we get:

30% = ($1486 + $68)/(gross monthly income)

30% = $1554/gross monthly income

gross monthly income = $1554/30% = $5180

Now, to calculate the TDS ratio, we need to add up all the monthly debts (including the car loan) and divide them by the gross monthly income.

TDS ratio = (monthly debts)/(gross monthly income)

Substituting the given values, we get:

40% = ($1486 + $68 + $346)/(gross monthly income)

40% = $1900/gross monthly income

gross monthly income = $1900/40% = $4750

The minimum gross monthly income that they need to qualify for both ratios is the higher of the two, which is $5180. Therefore, the correct answer is C.

Martina and Anton Are Attempting to Qualify for Total Mortgage