Big Bank will make Duane Miller a mortgage loan if it meets the 28/36 rule. His annual gross income is $45,000. He has a $675 monthly auto payment and the property taxes & homeowners insurance for a new home will cost $3,000 annually. Big Bank will give him a 30-year mortgage with a 7.5 percent fixed rate. Duane will make a 20% down payment.

1. What maximum purchase price for a home can Duane afford (how much house can he buy)? Round your answer to the nearest $1,000 and show your work.

2. Assume Duane pays off his auto loan thereby eliminating the $675 monthly payment. What maximum purchase price for a home can Duane now afford? Round your answer to the nearest $1,000 and show your work.