If you use the rule that mortgage, taxes, and insurance payments should not exceed 28% of gross income, then Duane can afford $1400 in mortgage expense each month. If $400 of that is taxes and insurance, then his loan payment can be $1,000. At $8.43 per thousand of loan value, he can afford a loan for $118,624. After putting 10% down, this amount is 90% of his home purchase price.
Duane can afford a home purchase price of up to $131,800.
