You have decided to purchase a home after graduation, and you are saving for the closing costs ($3500) and down payment. To avoid paying mortgage insurance and to get a better interest rate, you need a down payment of 20%. You can afford a monthly payment of $700 based on your current earnings and anticipated expenses. The amount available for the mortgage is reduced by an estimated $150 per month to cover home insurance and real estate taxes. The current nominal annual interest rate is 3% for a 30-year fixed-rate mortgage loan, payments made monthly. How much of a loan can you afford? What is the corresponding house price? How much must you save?