Dave and Diane Starr of New Orleans, Louisiana, both of whom are in their late 20s, currently are renting an unfurnished two-bedroom apartment for $1,300 per month, plus $240 for utilities and $34 for insurance. They have found a condominium they can buy for $170,000 with a 20 percent down payment and a 30-year, 6.5 percent mortgage. Principal and interest payments are estimated at $860 per month, with property taxes amounting to $150 per month and a homeowner's insurance premium of $900 per year. Closing costs are estimated at $4,200. The monthly homeowners association fee is $275, and utility costs are estimated at $240 per month. The Starrs have a combined income of $86,400 per year, with take-home pay of $5,400 per month. They are in the 25 percent t combined state and federal tax bracket, pay $225 per month on an installment loan (10 payments left), and have $40,000 in savings and investments outside of their retirement accounts.

Can the Starrs afford to buy the condo? Use the results from the Garman/Forgue companion website or the information on Did You Know box to support answer. Also, consider the effect of the purchase on their savings and monthly budget.

Dave and Diane think that their monthly housing costs would be lower the first year if they bought the condo. Do you agree? Assume that they currently have $10,000 in tax deductible expenses.

If they buy, how much will Dave and Diane have left in savings to pay for moving expenses? Round your answer to the nearest dollar.

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Available financial information suggests that mortgage rates might increase over the next several months. If the Starrs wait until the rates increase 0.5 percent, how much more will they spend on their monthly mortgage payment? Round Estimating Mortgage Loan Payments for Principal and Interest in your intermediate calculations to four decimal places. Use the information in Table 9-4 or the Garman/Forgue companion website to calculate the payment. Round your answer to the nearest dollar.

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