You are planning to buy a house, and have been saving up money to do so. You currently have $25,000 saved for a down payment and closing costs. You go to the bank for a mortgage. Assumptions:
– Closing costs are estimated to be 4% of the loan amount
– Your annual salary is $48,000, and the bank will allow you to borrow such that 28% of your pretax monthly salary goes to pay off the mortgage
– The current interest rate is 0.5% per month for a 30-year fixedrate mortgage
– How much can you borrow? What is the most you can offer on a house?