How does the lender determine my maximum loan amount?

The lender evaluates your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to your housing and non-housing expenses. It is presented as a ratio such as "28/36". The first figure in the ratio indicates the percentage of your income that will be used toward your total monthly housing expenses. The second figure in the ratio indicates the percentage of your income that will be used toward your total montly housing expenses plus all other monthly debt.

Typically a conventional loan mortgage allows you to use up to 28% of your income toward your housing costs and up to 36% of your income toward your housing and non-housing expenses. However, there are circumstances as well as different mortgage programs that may allow you to exceed this qualifying ratio.

The lender also considers the cash you have available for a down payment, closing costs and your credit history when determing the maximum loan amount you can borrow.

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