You are ready to buy a house and you have $35,000 for a down payment...
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You are ready to buy a house and you have $35,000 for a down payment and closing costs. Closing costs are estimated to be 3.5% of the loan value. You have an annual salary of $50,000. The interest rate on the loan is 5.75% per year with monthly compounding for a 20-year fixed rate loan.
The bank is willing to allow your monthly mortgage payment to be equal to 30% of your monthly income. Calculate the maximum amount the bank will loan you? (8 pts)
What is the maximum amount you can offer for the house if you borrow the maximum amount found in part (a)? (7 pts)
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