Suppose John earn $60,000 annual salary. He needs to make $310 monthly payment on his new car. He also needs to make $190 monthly payment on his student loan. Estimated monthly property tax and homeowner’s insurance is $450. John believes that it is a good time to buy his own condominium rather than renting an apartment.
a. What is the maximum monthly mortgage payment that John can afford, if the lender’s affordability ratios stipulate that his total installment payments do not exceed 36% of her monthly gross income?
b. Suppose that John has $50,000 savings that can be used as a down payment and closing cost of the condominium. Estimated closing cost is $4,500. He qualifies for a 30-year mortgage with 3.6% APR compounded monthly. What is the most expensive housing that John can afford?