A young married couple has carefully looked at their budget. After review, they can afford a monthly mortgage payment of $1,053.00. They go to their local banker and she offers them a mortgage of 5.28% APR with monthly compounding with a term of 30 years. The couple has enough savings to pay 20% down, so the mortgage will be 80% of the home’s value.
1. What is the mortgage that the couple can apply for based on their budget and the offered terms?
2. With this mortgage and a 20% down payment, what priced house can the couple afford?