After looking at your budget, you have decided that you can afford a monthly mortgage payment of $1,247.  What is the maximum price you can spend on a house if you plan to put 20% down and use a 30-year fixed-rate mortgage with an interest rate of 3.97%?

**Answer should be formatted as a dollar amount rounded to the nearest cent.**
 

To find the maximum price you can spend on a house based on your budgeted monthly payment of $1,247, a 20% down payment, and a 30-year fixed-rate mortgage at 3.97%, we'll follow these steps:

1. **Calculate the loan amount you can afford:**
   - Use the monthly mortgage payment formula to determine the loan amount $ P $:
   \[
   M = P \frac{r(1+r)^n}{(1+r)^n - 1}
   \]
   - Where:
     - $ M = 1247 $ (monthly payment)
     - $ r = \frac{3.97\%}{12} $ (monthly interest rate)
     - $ n = 30 \times 12 $ (total payments over 30 years)

2. **Calculate the maximum loan amount:**
   - Rearrange the formula to solve for $ P $:
   \[
   P = M \frac{(1+r)^n - 1}{r(1+r)^n}
   \]

3. **Calculate the maximum home price:**
   - Since the loan amount represents 80% of the home's value (after a 20% down payment), divide the loan amount by 0.80 to find the maximum home price.

Let's calculate the maximum home price step-by-step.The maximum price you can spend on a house, given your budget and the specified mortgage terms, is **$327,683.70**.

Would you like more details or have any questions? Here are some related questions:

1. How would a lower interest rate affect the maximum home price you can afford?
2. What would the maximum home price be if you increased your down payment to 30%?
3. How much would you save in interest if you chose a 15-year mortgage instead?
4. What happens if your monthly budget increases by $100? How does it affect the maximum price?
5. How do property taxes and insurance affect your overall budget for home buying?

**Tip:** Increasing your down payment can significantly increase the maximum home price you can afford while keeping the monthly payment the same!

Discover the maximum house price you can afford with a budgeted monthly mortgage payment of $1,247. Learn how to calculate this based on a 20% down payment and a 30-year fixed-rate mortgage at 3.97% interest rate.

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