Problem #1.

You are ready to buy a house and you have $40,000 for a down payment and closing costs.

Closing costs are estimated to be 4% of the loan value.

You have an annual salary of $63,000.

The bank is willing to allow your monthly mortgage payment to be equal to 28% of your monthly income.

The interest rate on the loan is 6% per year with monthly compounding (.5% per month) for a 30-year fixed rate loan.

How much money will the bank loan you?

How much can you offer for the house?