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Figure 34.1Renting an ApartmentEvaluating Housing AlternativesAdvantagesEasy to move; low maintenanceresponsibility; low financial commitment.DisadvantagesNo tax advantage; limitations on activities;less privacy.Renting a HouseOwning a HouseOwning aCondominiumOwning a Mobile HomeEasy to move; low maintenanceresponsibility; low financial commitment;more space.Pride of ownership; plenty of space; taxbenefits.Pride of ownership; fewer maintenancecosts or responsibilities than a house;tax benefits; access to recreation andbusinesses.Less expensive than other ownershipoptions.Higher utility expenses; some limitationson activities; no tax advantage.Financial commitment; high livingexpenses; limited mobility.Financial commitment; less privacy than ina house; need to get along with others;typically small and limited space; may behard to sell.May be hard to sell; possible poorconstruction quality.HOUSING ALTERNATIVESChoosing a type of housing is a decision thatinvolves many trade-offs. What are the threeadvantages or disadvantages on this list thatseem most important to you right now?FHA loans (loans insured by the Federal Housing Administration) canbe obtained with a down payment of 3 to 5 percent. Conventional bankloans require down payments ranging from 10 to 30 percent. See Figure34.2 for more information on loans.Loan Qualifications A lender will judge your ability to repay yourloan based on your credit report and your debt ratio , or the amount ofyour monthly payments compared to your monthly income. Your mortgagepayment, including taxes and insurance, should not exceed 28 percentof your monthly gross income. Total monthly debt payments(including your new mortgage, credit cards, car payments, and so on)should not exceed 36 percent of your income.Example 1. Ariel’s gross pay is $40,000 a year ($3,333 a month).The most she can afford for a monthly mortgage payment at 28percent is $933. Her total monthly debt payments at 36 percentshould not exceed $1,200.Chapter 34: Buying a Home 731