Fred B. and Kadine P. and are the parent of two children, aged 7 and 9-years old. They have been living in a 2-bedroom apartment for the past 10-years and are planning on purchasing a house because Kadine is expecting a third child. Their combine salaries totaled $110,000 and have estimated monthly debt payment of $6,500 (rent, utilities, streaming services, car lease, etc.). Estimated monthly taxes + Insurance is $900.

Fred and Kadine had contacted your group of financial advisors, to get information on purchasing a house. Your group had conducted a due diligence on their financial position and learned they can acquire the required 20% down payment through savings and down-payment assistance programs. They also want to have a 30-year fixed interest rate (6.5%) loan (mortgage factor of 6.2 per $1,000). They are however confused on what the house buying process is about and are debating if they should rent a larger apartment or make the commitment to purchase a house.

Q1. Please calculate the affordable house purchase price their combined salaries can afford.