According to Housing Recommendation #2 presented in this class, if a family has a gross annual income of $102,000, what should be the maximum amount of a mortgage loan the family could afford? State your answer in terms of dollars, but do not include a $ sign in your response.
Answer (2)
The family with a gross annual income of $102,000 can afford a maximum mortgage loan of 255000, based on the guideline of not exceeding 2.5 times their income. This calculation is essential for maintaining reasonable financial health. Knowing this amount helps in realistic budgeting when purchasing a home.
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Multiply the gross annual income by 2.5.
Calculate 102 , 000 × 2.5 .
The result of the multiplication is 255 , 000 .
The maximum mortgage loan amount the family can afford is 255000 .
Explanation
Understanding the Problem We are given that a family has a gross annual income of $102,000. We need to find the maximum mortgage loan amount the family can afford according to Housing Recommendation #2. Housing Recommendation #2 states that a family can afford a mortgage that is 2.5 times their gross annual income.
Calculating the Maximum Loan Amount To find the maximum affordable mortgage loan amount, we need to multiply the gross annual income by 2.5. So, we need to calculate 102 , 000 × 2.5 .
Determining the Result Performing the multiplication, we get: 102 , 000 × 2.5 = 255 , 000 Therefore, the maximum mortgage loan amount the family can afford is $255,000.
Final Answer The maximum amount of a mortgage loan the family could afford is 255000.
Examples
Understanding how much mortgage you can afford based on your income is crucial in financial planning. For example, if you want to buy a house and your annual income is $102,000, knowing that you can afford a mortgage of up to $255,000 helps you set a realistic budget. This calculation ensures you don't overextend financially and can manage your mortgage payments comfortably. It's a practical application of understanding proportions and financial ratios in real-life scenarios.
