Mike and Teresa Garza have a monthly gross income of $5,000, but they pay $1,000 per month in taxes. They also pay $2,000 per month in various loan payments. What is their debt service ratio?
40%
To calculate the debt service ratio, we need to first calculate the total monthly debt payments.
Total Monthly Debt Payments = Taxes + Loan Payments
= $1,000 + $2,000
= $3,000
Next, we can calculate the debt service ratio using the following formula:
Debt Service Ratio = (Total Monthly Debt Payments / Monthly Gross Income) * 100
Debt Service Ratio = ($3,000 / $5,000) * 100
= 0.6 * 100
= 60
Therefore, the debt service ratio of Mike and Teresa Garza is 60%.
To calculate the debt service ratio, we need to find the total monthly debt payments as a percentage of the monthly gross income.
First, we need to find the total monthly debt payments, which is the sum of their tax payment and loan payments:
Total monthly debt payments = Tax payment + Loan payments
Total monthly debt payments = $1,000 + $2,000
Total monthly debt payments = $3,000
Now, let's calculate the debt service ratio:
Debt Service Ratio = (Total monthly debt payments / Monthly gross income) x 100
Debt Service Ratio = ($3,000 / $5,000) x 100
Debt Service Ratio = 0.6 x 100
Debt Service Ratio = 60%
Therefore, Mike and Teresa Garza's debt service ratio is 60%.