Question

larry has saved $18,500 toward a down payment on a house. if he makes $3,890 a month, how much can he afford to spend on a house?
$100,000
$93,369
$111,860
$65,180

Explanation:

Step1: Recall the rule for house affordability (usually 28% of monthly income for mortgage, plus down payment, but here maybe a simpler approach: assume a common mortgage calculation, or maybe the problem uses a formula where house price = down payment + (monthly income 240) (20 years 12 months, but let's check the options). Wait, maybe the standard is that the mortgage amount is 28% of monthly income times 360 (30 years) or 240 (20 years). Let's try 28% of $3,890 is $3,890 0.28 = $1,089.2 per month. Then total mortgage over 30 years (360 months) is $1,089.2 360 = $392,112, which is too big. Wait, maybe the problem is using a different approach. Wait the options are lower. Wait maybe the house price is down payment + (monthly income * 24) * 10? No, let's check the options. Let's see the down payment is $18,500. Let's check each option:

Option C: $111,860. Subtract down payment: $111,860 - $18,500 = $93,360. Now, $93,360 divided by monthly income $3,890: $93,360 / $3,890 ≈ 24 months? No, 24 years? Wait 3,890 24 = 93,360. Oh! Wait, maybe the formula is house price = down payment + (monthly income 24). Wait 3,890 * 24 = 93,360. Then 93,360 + 18,500 = 111,860. Yes! That matches option C. So:

Step1: Calculate mortgage amount as monthly income * 24 (assuming 24 times monthly income for mortgage)

$3,890 * 24 = $93,360

Step2: Add down payment to mortgage amount

$93,360 + $18,500 = $111,860

Answer:

C. $111,860