You are applying for a conventional mortgage from the Americana Bank. Your monthly gross income is $3,500, and the bank uses the 28% house expense ratio guidline.
a. What is the highest PITI for which you can qualify for? (PITI is an acronym for Principal, Interest, Tax, Insurance)
b. Based on your answer from part a, if you are applying for a 30 year, 9% mortgage and the taxes and insurance portion of PITI is $175 per month, calculate the size of the mortgage for which you qualify for using the table of monthly payments amortize to find the appropriate factor.
c. Based on your answer for part b, if you are planning on a 20% down payment, what is the most expensive house you can afford?