How Does The Lender Determine Your Loan Amount?

The overall way that lenders decide how much loan you qualify for, and that  is by considering your debt-to-income ratio. This is a comparison of your gross (pre-tax) income to housing and other expenses.

Other expenses include such long-term debts 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, while the mortgage payment, combined with non-housing expenses, should total no more than 41% of income.

Lenders also consider cash available for down payment and closing costs credit history and the rest of your financial picture when determining your maximum loan amount.

 

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