- 1). Check your paychecks to determine your pretax monthly income. If your income varies from month to month, use your average pretax income.
- 2). Multiply your pretax monthly income by 0.28 (28 percent) to determine your maximum monthly mortgage expenses. For example, if your pretax monthly income was $7,000, lenders would not want you to spend more than $1,960 per month on your mortgage expenses.
- 3). Multiply your pretax monthly income by 0.36 (36 percent) to determine your maximum monthly debt payments. For example, if your pretax monthly income was $7,000, lenders would not want you to spend more than $2,520 per month on your debt payments.
- 4). Subtract any other debt payments that you have to make each month to determine how much you can spend on your mortgage expenses. Other debt payments can include car loans and student loans. For example, if you have a $300 per month car loan payment, you would subtract $300 from $2,520 to get $2,220.
- 5). Use the lesser of the results from Step 2 and Step 4 to determine your maximum monthly mortgage expenses. In this example, since $1,960 is less than $2,220, your maximum monthly mortgage expenses should not exceed $1,960.
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