Janice is all moved in! Let’s look at how they did comparatively
$1,530/month
$225,000
4 bedroom house
FHA oan, 0% down
$0 leftover
75% of income
$225,000
4 bedroom house
Fannie Mae loan, 3% down
Insufficient funds
$562/month
$80,000
2 bedroom condo
FHA loan, 0% down
$2,600 leftover
28% of income
$549/month
$80,000
2 bedroom condo
Fannie Mae loan, 3% down
$200 leftover
27% of income
$1,040/monthly payment
1 bedroom
$2,920 leftover
52% of income
$750/monthly payment
Studio
$3,500 leftover
37% of income
While Janice could manage purchasing the 4 bedroom house with an FHA loan, it would leave her insolvent and unable to cover any other immediate expenses. Purchasing the condo gives Janice the best balance of investment and keeping her monthly living expensve below the 30% range that is typically recommended22.
The studio apartment could be a good option if Janice wanted to save up to be able to afford a higher monthly payment for purchasing property. But would have a higher monthly payment and less room than if they bought the condo.