Question

Luis wants to buy a home priced at $315,000. He plans to finance this amount less the down payment required. His mortgage payment would then be $2100. Luis has an annual income of $91,500 and $65,000 in savings. Luis has a car payment of $370, a student loan payment of $165 and a credit card payment of $45. Use a 20% down payment and the 28/36 ratio to determine if Luis is eligible for a loan. What would you advise him to do if he is not eligible?
a.
Luis is eligible for a home loan; he meets all of the requirements.
b.
Luis is not eligible for a home loan; he should continue to save for a down payment.
c.
Luis is not eligible for a loan; he should look for a cheaper house.
d.
Luis is not eligible for a loan; he should reduce his recurring debt.

Answer 1

The correct option is that A. Luis is eligible for a home loan; he meets all of the requirements.

How to depict the information?

From the information, the monthly income will be:

= $91500/12

= $7625

The loan payment as a percentage will be:

= 2100/7625

= 27.54%

Since this is less than 28%, then Luis is eligible for a home loan; he meets all of the requirements.

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