How much can I qualify for?

The mortgage amount that you can qualify for depends on your income and current debt levels. For most lenders, the mortgage payment for which you will qualify is less than 32 percent of your monthly income. In other words, the total of your monthly housing expenses (principal, interest, heating costs and taxes) should not exceed 32 percent of your gross monthly income. Furthermore, most lenders will not allow you to have a mortgage payment that, when combined with your monthly debt payments, exceeds 40 percent of your gross monthly income. Monthly debt payments include car loan payments, credit card payments, credit line payments and so on. Lenders will multiply your gross monthly income by 40 percent and subtract monthly debt payments to arrive at the total you can afford for mortgage interest, taxes, heating and mortgage principal each month. In turn, the monthly payment determines the total mortgage for which you qualify.

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