Finance 510

Sarah’s gross salary is $200,000 per year. She is interested in purchasing a $600,000 house. She will make a down payment of 20% and take out a 15 year, 4.5% fixed rate mortgage. The taxes plus insurance is $8000. In addition, she has student debt and makes annual payments of $6000 per year. What is the Gross Debt Service and Total Debt Service ratio? If the bank requires that these ratios must be less than 30 and 35% respectively, can she obtain her mortgage?

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