Marla's gross income is $18,500. What is the maximum amount she
should consider spending to purchase a house?
a. $18,500
b. $46,250
c. $7,400
d. $37,000
To determine the maximum amount Marla should consider spending to purchase a house, it is recommended to use the general guideline of not spending more than 28% of gross monthly income on housing expenses.
Step 1: Calculate the monthly gross income:
Monthly income = Annual income / 12
Monthly income = $18,500 / 12
Monthly income = $1,541.67 (approximately)
Step 2: Calculate the maximum housing expense:
Maximum housing expense = Monthly income * 0.28
Maximum housing expense = $1,541.67 * 0.28
Maximum housing expense = $431.25 (approximately)
Therefore, the maximum amount Marla should consider spending on a house is $431.25. However, none of the given answer options match this amount.
To determine the maximum amount Marla should consider spending to purchase a house, we need to consider her gross income. Gross income refers to the total income earned before any deductions or taxes are taken out.
In this case, Marla's gross income is given as $18,500. Financial experts often recommended that individuals do not spend more than 30% of their gross income on housing expenses. So, to find the maximum amount Marla should consider spending on a house, we can multiply her gross income by 30% (or 0.3):
Maximum amount = Gross income * 0.3
Maximum amount = $18,500 * 0.3
Maximum amount = $5,550
Now comparing the options provided:
a. $18,500: This option matches Marla's gross income, but it does not align with the recommended guideline of not spending more than 30% of gross income on housing expenses.
b. $46,250: This option does not match Marla's income or the recommended guideline.
c. $7,400: This option is less than the recommended guideline and seems reasonable.
d. $37,000: This option does not match Marla's income or the recommended guideline.
Therefore, the maximum amount Marla should consider spending to purchase a house is $7,400, which is option c.