- 1). Consult your pay stub to find your pretax monthly income. Lenders base your maximum monthly payment on your pretax income.
- 2). Multiply your pretax income by the lender's front-end ratio limit. The front-end ratio measures the percentage of your income the mortgage can take up. Most lenders limit your front-end ratio to about 28 percent. For example, if your pretax income equals $3,500, you would multiply $3,500 by 0.28 to get $980.
- 3). Multiply your pretax income by the lender's back-end ratio limit. The back-end ratio measures the percentage of your income the mortgage and your other debt payments can take up. Most lenders limit your back-end ratio to between 33 and 36 percent. For example, if your pretax income equals $3,500, you would multiply $3,500 by 0.33 to get $1,155.
- 4). Subtract any other debt obligations you have from the back-end ratio limit. For this example, if you have a car payment of $400 per month, you would subtract $400 from $1,155 to get $755.
- 5). Select the lessor of the front-end ratio and back-end ratio after other debts have been accounted for to use as the maximum mortgage monthly payment. In this example, since $755 is less than $1,155, the lender would limit your mortgage to one that has a monthly payment of $755 or less.
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