## Mortgage

Mortgage companies qualify applicants based on credit scores, income and debt ratios. As a mortgage broker, you have decided to create a spreadsheet that will automate the loan qualification process. When a customer calls, you want to be able to enter the caller's income and debt information and have your spreadsheet instantly give you the maximum loan amount that you can approve for this applicant.

Assume the mortgage company has a back-end ratio maximum of 28% and 36%. This is a typical ratio for conforming Fannie Mae loans for applicants with credit scores of at least 660. This ratio means that the mortgage payment cannot exceed 28% of gross monthly income. Plus, the total monthly payments (new mortgage payment and new total debt) cannot exceed 36%.

This is a common ratio used today and will allow you to include the effect of monthly car payments and other consumer debt in your spreadsheet analysis.

Use the following as a guide to set up your Mortgage Calculator.

HINT: You'll need to use the =IF(condition, true, false) function to compute the maximum payment based on the condition: Is the monthly debt percentage greater than the allowable (difference between the 36% maximum total debt and the 28% maximum mortgage payment)?

Thus, maximum payment formula is: =IF((A7/A6)>(D8-D7),(D8-(A7/A6))*A6,D7*A6)

Use Excel help feature to find the appropriate function to compute the loan amount in cell A18. HINT: =PV(???)

Maximum House Price will be the Maximum Mortgage amount plus the down payment. Note: the Maximum Mortgage Amount is the same as the Loan Amount.

Save your spreadsheet as MTG.xls when you have finished.