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Five years after you graduate from MSU, you receive a promotion that increases your salary to $120,000 per year. You have decided to buy a

Five years after you graduate from MSU, you receive a promotion that increases your salary to $120,000 per year. You have decided to buy a house, so you go to a bank that gives you the following offer on a loan: 9% annual interest, no down payment required, closing costs of 5% of the amount borrowed, 30 year loan with monthly payments, and the amount of the monthly payment cannot exceed 25% of your monthly pre-tax pay. In addition to that maximim amount you can borrow from the bank, you have saved $50,000 that you will put toward the purchase of the house. What is the maximum price that you can afford to pay for the house (hint: you will borrow the maximum amount the bank will allow you to borrow, and add the money you have saved onto that; and you must also pay the closing costs)?

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  • $76,899.93

  • $310,704.66

  • $345,169.43

  • $360,704.66

  • $373,739.90

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