Bank A's Lending Rules:

- 30 year mortgage

- 28/36 housing to long term debt ratio

- 6% interest rate ($6/$1000 borrowed each month for 30 years)

- 80/20 loan/down payment ratio

Couple is earning $120,000/year

1. What price home can the above couple afford based on Bank A's lending rules and if taxes and insurance costs $36/$1000 of the cost of the home?

2. What priced home can the couple afford, if interest rate are now at 4% or $4.77/$1000 borrowed per month for 30 years (TI $36/$1000)

3. What priced home can the couple afford, based on the information in question 1, if the bank is now offering a 90/10, loan/down payment requirement (TI $36/$1000)