To determine how many points Mimi needs to improve her credit score in order to afford a [tex]$150,000 mortgage, we can follow these steps:
1. Calculate the maximum monthly payment:
- Mimi can afford to pay up to $[/tex]12,500 annually.
- To find her maximum monthly payment, divide the annual payment by 12:
[tex]\[
\text{Monthly payment max} = \frac{12,500}{12} = \text{\$1041.67}
\][/tex]
2. Review the mortgage payment table:
- Given the FICO score ranges and monthly payments:
[tex]\[
\begin{array}{|c|c|c|}
\hline \text{FICO score} & \text{Interest rate} & \text{Monthly payment} \\
\hline 720-850 & 5.59\% & \text{\$860} \\
\hline 700-719 & 5.71\% & \text{\$872} \\
\hline 675-699 & 6.25\% & \text{\$924} \\
\hline 620-674 & 7.40\% & \text{\$1039} \\
\hline 560-619 & 8.53\% & \text{\$1157} \\
\hline 500-559 & 9.29\% & \text{\$1238} \\
\hline
\end{array}
\][/tex]
3. Determine the minimum FICO score needed:
- The goal is to find the monthly payment that is less than or equal to Mimi's maximum affordable monthly payment ([tex]$1041.67).
- From the table:
- $[/tex]1157[tex]$ is too high for FICO 560-619.
- $[/tex]1039[tex]$ is affordable for FICO 620-674.
Hence, Mimi needs to be within the FICO score range of 620-674.
4. Calculate the score improvement needed:
- Mimi’s current FICO score is 531.
- To qualify for the range 620-674, she needs at least a score of 620.
- The score improvement required is:
\[
620 - 531 = 89 \text{ points}
\]
Thus, Mimi would need to improve her credit score by 89 points to afford a $[/tex]150,000 mortgage within her maximum monthly payment limit. The correct answer is:
B. 89 points
