- Calculate the gross monthly income: \(\frac{\$60,750}{12} = \$5,062.50\).
- Apply the 28% guideline: \(\$5,062.50 \times 0.28 = \$1,417.50\).
- Match the result with the given options, confirming the correct answer is B.
- Final Answer: \(\boxed{B}\)
Explanation
- Calculate the Monthly Gross Income
To determine the maximum mortgage payment allowed under the 28% guideline, we first need to calculate the borrower's gross monthly income based on their annual salary. Given an annual salary of \(\$60,750\), we divide this amount by 12 months. This gives us:
\[ \text{Monthly Income} = \frac{\$60,750}{12} = \$5,062.50 \]
This figure represents the total gross income the individual earns each month.
- Calculate the Maximum Mortgage Payment
The "28/36" mortgage guideline suggests that a borrower's total monthly mortgage payment (principal, interest, taxes, and insurance) should not exceed 28% of their gross monthly income. To find the maximum allowed payment, we multiply the monthly income by 0.28:
\[ \text{Maximum Mortgage Payment} = \$5,062.50 \times 0.28 = \$1,417.50 \]
Thus, the maximum mortgage payment according to the 28% rule is \(\$1,417.50\).
- Identify the Final Answer
Comparing our result of \(\$1,417.50\) with the provided choices:
A\(\$1,215.00\)
B\(\$1,417.50\)
C\(\$1,701.00\)
D\(\$1,822.50\)
The calculated value corresponds to option b. Therefore, the correct choice is B.
Examples
Mortgage guidelines like the "28/36" rule are essential tools used by lenders to assess a borrower's creditworthiness and financial stability. By capping mortgage payments at 28% of gross income, lenders help ensure that borrowers do not become "house poor" and can maintain a reasonable standard of living. Similar calculations are used in personal financial planning to determine affordable housing costs based on one's monthly budget and total debt obligations. Understanding these percentages helps individuals set realistic goals when planning to purchase a home.