In most cases mortgage companies determine the amount of mortgage they think you can comfortably handle by following the guidelines of "28-36" as set by the Federal National Mortgage Association ("Fannie Mae"). This means that you can spend up to 28% of your gross monthly income for your basic housing expenses. Basic housing expenses include principal and interest, real estate taxes, home insurance, and homeowner's association dues, if applicable. The next number, 36%, means that your housing expense of 28% can have an additional 8% of long term debt added to it for a total of 36% for housing and debts together. Long term debt is usually considered to mean that the term of the debt is 10 months or longer, making regular, minimum monthly payments. This can include car loans, student loans, revolving charge card balances, alimony or child support.

If you are putting down less than 10% for the purchase of your new home, Fannie Mae will adjust the guidelines to "25-33", meaning that 25% of your income can be used for housing expense and 8% for long term debt.

Mortgage professionals use the term PITI. This stands for:

Each mortgage company, and each individual mortgage program, may have its own set of requirements for qualifying. These requirements can change when market conditions dictate.

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