John bought a home after graduation and he is saving for the closing costs ($3000) and down payment. To avoid paying mortgage insurance and to get a better interest rate, he needs a down payment of 20%. He can afford a monthly payment of $700 based on his current earnings and expenses. The amount available for the mortgage is reduced by an estimated $200 per month to cover home insurance and real estate taxes. The current nominal annual interest rate is 4% for a 30 year fixed mortgage loan, payments made monthly. How much of a loan can you afford? What is the corresponding house price? How much must John save?