Reference no: EM132538259

Point 1: Isabella and Raphael are interested in buying a home. They have completed the initial steps in the home-buying process, including contacting a realtor and obtaining a pre-approval certificate from their bank. During the process of determining an affordable down payment, they have asked you to determine whether their GDS and TDS ratios are within the guidelines set by their bank. They have provided you with the following information. Isabella earns $35 000 per year, while Raphael earns $30 000 per year. They believe that they could afford a mortgage payment of about $1000 per month. The annual property taxes in the area where they would like to purchase a home average about $1600. Heating costs should be about $125 per month. The couple has an outstanding balance on their line of credit of $15 000. In addition, Raphael has an outstanding balance on his student loan of $10 000. Currently, the couple is making a monthly payment of $450 on their line of credit and $300 on the student loan. Their bank requires that the GDS ratio be no more than 32 percent and the TDS ratio be no more than 40 percent.

Question 1: Do Isabella and Raphael meet these requirements?