Max and Seymour are purchasing their first home using a VA guaranteed mortgage loan. Both have full entitlement. Their combined GMI is $1900.00. Their other monthly obligations total $200. What housing expense payment can they qualify for? _________
They are also using VA financing at an interest rate of 5 1/4% for 30 years. What mortgage amount can the qualify for estimating 60% of their housing expense for principal and interest?
To determine the housing expense payment that Max and Seymour can qualify for using a VA guaranteed mortgage loan, you need to consider their Gross Monthly Income (GMI) and their other monthly obligations.
Their combined Gross Monthly Income (GMI) is given as $1900.00, and their other monthly obligations total $200. Now, to find their qualifying housing expense payment, you generally follow a debt-to-income ratio guideline provided by VA. This guideline suggests that the total debt-to-income ratio, including the proposed housing expense, should not exceed 41% of the GMI.
To calculate the maximum housing expense payment (HEP) they can qualify for, you'll need to subtract their other monthly obligations from their GMI and then multiply it by 41%:
GMI - Other Monthly Obligations = Maximum Qualifying Housing Expense Payment
Let's calculate it step by step:
Step 1: Subtract their other monthly obligations ($200) from their combined GMI ($1900.00):
$1900.00 - $200 = $1700.00
Step 2: Multiply the result by 41%:
$1700.00 x 0.41 = $697.00
Therefore, Max and Seymour can qualify for a housing expense payment up to $697.00.
Moving on to the next part of the question, you want to determine the mortgage amount they can qualify for based on an estimated 60% for principal and interest. To calculate this, you need to know the monthly payment amount for the estimated 60% principal and interest component.
To calculate the monthly payment on a mortgage loan, you'll need to use the loan amount, interest rate, and loan term. The interest rate is given as 5 1/4% (or 5.25%).
Now, let's calculate the mortgage amount:
Step 1: Convert the interest rate to a decimal:
5 1/4% = 5.25% = 5.25/100 = 0.0525
Step 2: Determine the loan term, which is given as 30 years.
Step 3: Use a mortgage calculator or a formula to calculate the monthly payment, considering the loan amount, interest rate, and loan term. Since we want to find the loan amount, we'll rearrange the formula.
Loan Amount = Monthly Payment / (Interest Rate * Term)
The monthly payment will be 60% of the qualifying housing expense payment ($697.00 * 0.60).
Step 4: Calculate the loan amount:
Loan Amount = ($697.00 * 0.60) / (0.0525 * 30)
Loan Amount = $418.20 / 0.1575
Loan Amount ≈ $2655.56
Therefore, Max and Seymour can qualify for a mortgage amount of approximately $2655.56, considering 60% of their housing expense payment for principal and interest.