Difference Between Low Cost Housing & Affordable Housing

When you're searching for a home, real estate marketing terms can obscure the facts about a given property. One such term is "affordable." Though they may seem synonymous, "affordable" and "low-cost" don't always mean the same thing. Knowing the differences between the two can make your home search experience less complicated.

For some people, a $3,000 apartment rent or a $500,000 mortgage is affordable. Given that as of 2011 the average apartment rent is $961 and the average mortgage is $248,800, these are hardly low home costs. The key difference between affordable and low-cost housing is that the former is housing that you, specifically, can afford. Low-cost housing, on the other hand, is less expensive than average or than what you can afford.

Creditors generally prefer that your housing costs take up no more than 28 percent of your income. While this is a somewhat arbitrary rule, using it as your guideline can help you establish a reasonable budget and increase your chances of getting a mortgage loan. Housing costs include things such as rent, mortgage, property taxes and homeowner's insurance. Add up your monthly costs for these things and divide the total by your monthly income. If your housing-to-income ratio is 28 percent or lower, your housing is what creditors consider affordable for you. Renting or buying below your means helps protect you during rough financial times, so aim for a ratio of less than 28 percent.

Use multiple resources to search for a home, such as online and print classified ads and real estate publications. Only consider homes that are within your budget and from there decide which homes interest you. Conducting your search this way — rather than considering price last — helps you stay within an affordable price range. Yet price isn't all that determines the cost of a home. If an apartment is located far away from your workplace, for example, the cost of gas you need to commute may make the home less affordable than you first thought. If a house is in a dangerous neighborhood, the cost of protecting and replacing your belongings may prove too costly. Visit a home at various times of day and speak with current residents before making a decision.

If you find it difficult to locate affordable housing, contact your local public housing agency. You may qualify for government housing assistance from the U.S. Department of Housing and Urban Development.