Debt To Income Ratio and Your Loan Amount

How does a mortgage lender decide the maximum amount of money I can borrow for my home?

1 Answer

A lender looks at what is know as debt to income ratio. For most lenders, this is 50% of your gross income. Take your income before taxes and divide it in half. Your mortgage, taxes, insurance and other monthly payments cannot exceed this number.

The amount of money that you can borrow is also a measurement of your risk. The lender will look at credit, employment, income, assets, equity, etc.