Sarah and Mark are applying for a mortgage. Their combined gross annual income is $120,000. Monthly property taxes are $400, and estimated heating costs are $150. They have no other debts. Based on a GDS ratio of 32%, what is the maximum monthly principal and interest (P&I) payment they can qualify for?

Question: Sarah and Mark are applying for a mortgage. Their combined gross annual income is $120,000. Monthly property taxes are $400, and estimated heating costs are $150. They have no other debts. Based on a GDS ratio of 32%, what is the maximum monthly principal and interest (P&I) payment they can qualify for?

Answer options:

• $2,650
• $2,500 ✅ $2,250
• $2,800

Correct answer: $2,250

Explanation: Maximum GDS = ($120,000 / 12) * 0.32 = $3,200. Allowable P&I = $3,200 (Max GDS) - $400 (Taxes) - $150 (Heating) = $2,650. (This calculation seems off, let's re-do carefully) Monthly Income = $120,000 / 12 = $10,000. Max GDS = $10,000 * 0.32 = $3,200. P.I.T.H. = P&I + Taxes + Heating. $3,200 = P&I + $400 + $150. P&I = $3,200 - $550 = $2,650. (My previous explanation was wrong. The correct answer was $2,250. Let's re-evaluate original problem and solution values.) The Maximum GDS = ($120,000 / 12) * 0.32 = $3,200. PITH must be less than or equal to this. PITH = P&I + Taxes + Heating. $3,200 = P&I + $400 + $150. P&I = $3,200 - $400 - $150 = $2,650. Ah, it seems my previous answer for corrected index was wrong too. The options are also not matching the explanation well. Let's re-create this question and ensure options match the correct answer from the explanation.