Response to the following problem:
Bob is a twenty-eight year old unmarried man and the assistant manager of a grocery store. For the past five years he's been a volunteer firefighter, which he trained for when he was in the Navy. He is really proud of his condo, and is happy he'll have his big screen TV paid off in a couple months because he wants to buy a new laptop computer. He jokes about working at the grocery store just to get his employee discount because his Great Dane eats about $50 worth of dog food a week! Bob has the following monthly income and expenses:
Gross monthly income: $5,300
Monthly principal and interest (including any PMI) $1,270
Monthly homeowners association fee $100
Annual property taxes $3,278
Annual homeowners insurance $650
Monthly auto payment $295
Semi-annual auto insurance $700
Average monthly gasoline expense $200
Monthly installment payment on the TV $97
Average monthly utilities $250
Monthly Internet/phone/cable TV $200
Bruno's dog food and tennis balls $250
Questions:
1. What is Bob's housing (front end) ratio? Show how you calculated this.
2. What is his debt-to-income (back end) ratio? Show how you calculated this. Without considering any compensating factors...
3. What is the maximum allowable housing ratio for a conforming loan?
4. What is the maximum allowable debt-to-income ratio for a conforming loan?
5. What is the maximum allowable housing ratio for an FHA loan?
6. What is the maximum allowable debt-to-income ratio for an FHA loan?
7. What is the maximum allowable debt-to-income ratio for a VA loan?
8. Which of these three types of loans does Bob qualify for?