The Delgados have a gross monthly income of 6000. Monthly payments on personal loans total $500. Their bank limits the gross debt service ratio at 33% and the total debt service ratio at 42%.
(a). Rounded to the nearest $100, what is the maximum 25-year mortgage loan for which they can qualify on the basis of their income? Assume monthly heating costs of 200 and property taxes of 220 per month. Current mortgage rates are 6.8% compounded semiannually.
(b). Rounded to the nearest $100, what minimum down payment must they have to qualify for the maximum conventional mortgage (80% loan-to-value ratio) on a new home?
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