If a borrower can afford $1,000 in monthly payments, what is the maximum loan amount for a 30-year mortgage at 5.5%?

To determine the maximum loan amount for a mortgage based on a fixed monthly payment, interest rate, and loan term, you can use the formula for the monthly payment of a mortgage. This formula derives from the annuity formula, since a mortgage is essentially a type of annuity that pays off the principal (the loan amount) and interest over time.

For a 30-year mortgage at an interest rate of 5.5%, the formula for the monthly mortgage payment (M) is:

[

M = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1}

]

where:

• M is the monthly payment

• P is the loan principal (the amount borrowed)

• r is the monthly interest rate (annual interest rate divided by 12)

• n is the total number of payments (loan term in months)

In this case, the annual interest rate is 5.5%, so the monthly rate is 5.5% / 12 = 0.0045833. The total number of payments for a 30-year loan is 30 x 12 = 360 months.

If the borrower can afford $1,000 a month, you can