Rollin and Sandra want to buy a home priced at $265,000. They plan to finance this amount less the down payment required. Rollin and Sandra have a combined annual income of $83,600 and have saved $53,000. They have a recurring debt of $582. Use a 20% down payment and the 28/36 ratio to determine if Rollin and Sandra are eligible for a loan. What would you advise them to do if they are not eligible?
Unfortunately, Rollin and Sandra will not qualify for a home loan. A down payment of 20% of $265,000 is $53,000. Even though they can afford the down payment, their recurring allowable debt is quite high. At $582, this exceeds the allowable recurring debt of $557. If they really want to qualify for a loan to buy their home, then they should work towards reducing their recurring debt from $582 to $557 or lower.