Problem: Lucy wants to purchase a home and has approached a bank and been informed that a 30 year mortgage loan with monthly payments and compounding would have an APR of 5.4 %. She has saved enough to put down 20% for the purchase and will finance the other 80%. Given her income level, she feels that she can afford a monthly house payment of $800.
1. How much money will she be able to borrow from the bank?
2. How much can she afford to pay for the home?