Five years from now she would like to buy a house or condo. She expects that, by the time she buys, the interest rate on a 30-year fixed rate mortgage with zero points and with a 20% down- payment will be at the historical average of 6%. She does not want her mortgage to be more than 25% of her monthly income.

If this is the case, what is the house she can afford to buy 5 years from now (and assuming that there is no inflation and all numbers are already incorporating taxes)?

Because she needs money for the down-payment, how much does she have to set aside today to have the money for the down-payment 5 years from now? Assume she can earn 5% per year on the money she sets aside now for the down-payment.

- This is what I have for the first part, I need help with the bold part

- At 35 years old she will have a monthly income of $6568.81 since her income will increase 1% each year. This means that the mortgage for her house or condo cannot be more than $1642.20 monthly, or $19,706 yearly.