using the maximum ratios for a conventional mortgage, how big a monthly payment could the Burton family afford if their gross (before-tax) monthly income amounted to $3500? Would it make any difference if they were already making monthly installment loan payments totaling $750 on two car loans?

Well, well, the Burton family, huh? Let me crunch some numbers while juggling this calculator.

According to the maximum ratios for a conventional mortgage, the Burtons could afford a monthly mortgage payment based on a certain percentage of their monthly income. Typically, lenders look at two ratios: the front-end ratio and the back-end ratio.

The front-end ratio looks at the percentage of the monthly income that can be allocated for housing expenses. Usually, this ratio shouldn't exceed 28%. So, to find out how much the Burton family could afford for their mortgage payment, we multiply their gross monthly income by 0.28:

$3500 * 0.28 = $980

Therefore, their monthly mortgage payment shouldn't exceed $980 considering only the front-end ratio.

Now, let's take a look at the back-end ratio. This ratio includes not only housing expenses but also other debt payments like car loans, credit card payments, and the like. Most lenders set a limit of around 36% for the back-end ratio.

If the Burton family is already making monthly installment loan payments totaling $750 on two car loans, we subtract that from their gross monthly income:

$3500 - $750 = $2750

Now, we calculate the maximum allowable debt-to-income ratio by multiplying their adjusted monthly income by 0.36:

$2750 * 0.36 = $990

So, with the car loan payments included, the Burton family could afford a maximum monthly mortgage payment of $990.

Hope that helps! Just don't forget to keep an eye on balloon animals while handling those mortgages! 🎈🏠

To determine the mortgage payment the Burton family can afford, we need to consider the maximum ratios for a conventional mortgage.

Generally, the maximum ratios for a conventional mortgage are:
- Front-end ratio: The monthly mortgage payment including principal, interest, taxes, and insurance (known as PITI) should not exceed 28% of the borrower's gross monthly income.
- Back-end ratio: The total debt-to-income ratio (including the mortgage payment and all other monthly debts) should not exceed 36% of the borrower's gross monthly income.

Let's calculate the maximum mortgage payment for the Burton family step-by-step:

Step 1: Calculate the maximum monthly payment based on the front-end ratio.
Front-end ratio: Max 28% of gross monthly income = 0.28 * $3500 = $980

Step 2: Calculate the maximum total debt-to-income ratio based on the back-end ratio.
Back-end ratio: Max 36% of gross monthly income = 0.36 * $3500 = $1260

Step 3: Determine the maximum monthly debt payment allowable.
Maximum monthly debt payment = Maximum total debt-to-income ratio - Existing monthly debt payments
Maximum monthly debt payment = $1260 - $750 = $510

Therefore, based on the maximum ratios for a conventional mortgage and the given information, the Burton family can afford a maximum monthly mortgage payment of $510.

If they were already making monthly installment loan payments totaling $750 on two car loans, it would affect their maximum total debt-to-income ratio. The maximum monthly debt payment allowable would be reduced as follows:

New maximum monthly debt payment = Maximum total debt-to-income ratio - Existing monthly debt payments
New maximum monthly debt payment = $1260 - $750 = $510

So, even with the car loan payments, the Burton family can still afford a maximum monthly mortgage payment of $510.

To calculate the maximum monthly payment the Burton family can afford for a conventional mortgage, we need to consider the maximum ratios typically used by lenders. These ratios include the housing expense ratio (HER) and the debt-to-income ratio (DTI).

1. Housing Expense Ratio (HER): This ratio determines the maximum percentage of the Burton family's gross monthly income that can be used for housing expenses (e.g., mortgage payment, property taxes, homeowner's insurance). Typically, lenders prefer this ratio to be below 28%.

To calculate the maximum HER, we multiply the monthly gross income ($3500) by the HER (28% or 0.28):
Maximum HER = $3500 * 0.28 = $980

Therefore, the maximum housing expense the Burton family can afford is $980 per month.

2. Debt-to-Income Ratio (DTI): This ratio determines the maximum percentage of the Burton family's gross monthly income that can be used to pay all debts (including the mortgage and any other outstanding loans). Typically, lenders prefer this ratio to be below 36%.

To calculate the maximum DTI, we deduct the monthly installment loan payments ($750 on two car loans) from the gross monthly income, and then multiply the remaining amount by the DTI (36% or 0.36):
Remaining income after car loan payments = $3500 - $750 = $2750
Maximum DTI = $2750 * 0.36 = $990

Therefore, the maximum total monthly debt payment the Burton family can afford, including the mortgage, is $990.

Considering both the HER and DTI, we can choose the lower value as the maximum monthly payment they can afford. In this case, the Burton family can afford a maximum monthly payment of $980.

Note: The monthly car loan payments are already considered in the DTI calculation, so it does not make any difference if they were already making these payments when determining the maximum mortgage payment they can afford.