Marcia wants to buy a home. Her monthly gross income is $8,000. She currently has a car payment of $550/month and a student loan payment of $400/month. The bank wants her to escrow $700/month for taxes and insurance.

The bank requires the following income and loan ratios;

a minimum down payment of 20%,

a P&I ratio < 25%,

a P, I, T, & HI ratio < 28%,

a P, I, T, HI and other debt service ratio < 43%

a LTV ratio of 80% or less.

A. What is the maximum market value of a home that Marcia could purchase given a current market rate on a 30-year fixed rate loan is 5.75%?

B. How much must Marcia have for the down payment?