In the example, what is the annual debt that the average household in this area can afford?

• A. $8,559
• B. $23,776
• C. $5,000
• D. $10,000

Answer: (A)

The key idea is that how much debt a typical buyer can take on is tied to income. Appraisers estimate debt service by applying a debt‑service percentage (a share of gross income that households in the area can comfortably devote to debt payments) to the area’s average gross annual income. In the example, using that percentage on the area’s average income yields about $8,559 as the annual debt the average household can afford. Put another way, $8,559 represents the annual debt service supported by the typical income level given the guideline used in the example. The other dollar amounts would come from using a different income level or a different debt‑service percentage, which isn’t what the scenario specifies.