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Required monthly principal and interest payment

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John would like to purchase a $180,000 home and is planning on making an $18,000 down payment for a 6.50 percent, 30-year, fixed-rate mortgage.

a) What is the required monthly principal and interest payment on this mortgage?

b) An appraisal has estimated the market value of this property to be $190,000. What is John's loan-to-value ratio? Will a lender likely require him to obtain PMI? Explain.

c) John's income is $65,000 per year. He also has the following monthly expenses:

Hazard insurance $80 Property taxes $170 PMI (if needed) $105 Auto payment $350 Credit cards $250 Monthly utilities $375 Student loan $400

Calculate John's front-end and back-end ratios. Given these figures, will John meet the traditional income guidelines for a conventional mortgage? Explain.

Reference no: EM133069467

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