How Does the Lender/Investor Decide the Maximum Loan Amount That I Can Afford?
The lender/investor considers 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. According to most investors, monthly mortgage payments should be no more than 33% of gross income, while the mortgage payment combined with non-housing expenses, should total no more than 40-45% of income. The lender/investor also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.
