The Buyers Guide
Two Lender Formulas
Most lenders will require that loan applicants meet both guidelines before approving a mortgage loan. The first formula compares income to housing costs without including long term debts, the second includes all debts.

28% Formula
Total Monthly Housing Costs
(P I. T I.)
__________________ = 28% (or less)
Gross Monthly Income

36% Formula
P.I.Tl. + All Monthly Debts
__________________ = 36% (or less)
Gross Monthly Income

A variety of other formulas exist. VA and some lenders use a single ratio based on mortgage payment and all debts, which allows easier qualifying for a more expensive home for a borrower with little debt.

To figure your housing budget, simply multiply your gross monthly income (before taxes) by 28% and 36%. For example, a family with a monthly income of $3,500 might qualify for a mortgage with payments up to $980. For specific figures, ask your Long & Foster Sales Associate.