Terms of Use:
The primary factor is your debt-to-income ratio,
which is a comparison of your gross (pre-tax) income to housing and non-housing
expenses. Non-housing expenses include such long-term debts as car or student
loan payments, alimony, or child support.
Many lenders believe you can afford a house if its price is under 2½ times
your household's annual gross income. Another rule
of thumb is that monthly mortgage payments should be no more than 29% of gross
income, while the mortgage payment, combined with non-housing expenses, should
total no more than 41% of income. The lender also considers cash available for
out-of-pocket expenses, such as down payment and closing costs, along with your
credit history when determining your maximum loan amount.
If you don't qualify, you may have to
buy a less expensive home, pay off some debts or delay your purchase until your
income increases.
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