Dave and Diane Starr of New Orleans Louisiana, both of whom are in their late 20's currently are renting a 2 bedroom apartment for $1,200 per month, plus $230 for utilities and $34 for insurance. They have found a condominium they can buy for $170,000 with a 20% down payment and a a 30 year, 6.5% mortgage. Principle and interest payments are estimated at $860 per month, with property taxes amounting $150 per month and a homeowners insurance premium of $900 per year. Closing costs are estimated at $4,200. The monthly homeowners Association fee is $275, and utility costs are estimated at $240 per month. The Starrs have a combined income of $90,000 per year. With take home pay of $5,800 per month. They are in the 25% tax bracket, pay $225 per month on an installment loan (10 payments left) and have $39,000 in savings and investments outside of their retirement accounts. (a) Can the Starrs afford to buy the condo? Also, consider the effect of the purchase on their savings and monthly budget.
(b) Dave and Diane think their monthly housing costs would be lower the first year if they bought the condo. Do you agree? Support your answer. Assume that they currently have $10,000 in tax deductible expenses.

(c) If they buy how much will they have left in savings to pay for moving expenses?

(d) Available financial information suggests the mortgage rates might increase over the next several months. If the Starrs wait until the rates increase 1/2 of 1%, how much more will they spend on their monthly mortgage payment?