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Capital structure Kirsten Neal is interested in purchasing a new house given that mortgage rates are at a historical low Her bank has specific rules regarding anapplicants ability to meet the

Capital structure Kirsten Neal is interested in purchasing a new house given that mortgage rates are at a historical low. Her bank has specific rules regarding anapplicant’s ability to meet the contractual payments associated with the requested debt. Kirsten must submit personal financial data for her income, expenses, and existing installment loan payments. The bank then calculates and compares certain ratios to predetermined allowable values to determine if it will make the requested loan. The requirements are as follows:

(1) Monthly mortgage payments

Monthly gross (before-tax) income

$ 4,500

Monthly installment loan obligations

375

Requested mortgage

150,000

Monthly mortgage payments

1,100

a. Calculate the ratio for requirement 1.

b. Calculate the ratio for requirement 2.

c. Assuming that Kirsten has adequate funds for the down payment and meetsother lender requirements, will Kirsten be granted the loan?

 

 

Jun 01 2020 View more View Less

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