The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. You Non-housing expenses include long-term debts such as car or student loan payments, alimony, or child support.

According to the FHA, monthly mortgage payments should be no more than 29% of gross income.  Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners’ dues, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify is 29%.

The mortgage payment, combined with non-housing expenses, should total no more than 41% of income. Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners’ dues, etc.) and all recurring monthly revolving and installment debt (car loans, personal loans, student loans, credit cards, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify is 41%.

The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.