Your Qualifying Ratios
Can you afford the monthly payments on your new house? That's the first querstion an underwriter asks when reviewing your file. To answer the question, the underwriter looks at your "ratios" -- the portion of your gross monthly income it takes to make your new housing payment.   

Two different ratios typically are analyzed:  The first ratio is the "top" ratio or housing expense ratio. The second ratio is the "bottom" or total debt ratio.

The top ratio is calculated as follows:

Monthly Housing Expense (PITI)
Gross Monthly Income

The bottom ratio is calculated as follows:

All other monthly debts include car payments, revolving charge accounts, real estate loans, student loans, credit union loans, 401(k) loans, child support and alimony payments, etc.

Acceptable ratios vary by loan program, by the amount of down payment and credit score. For example, acceptable ratios on a standard fixed rate loan would be as follows:

90% Loan (10% Down payment) 35/41

80% Loan (20% Down payment) 38/45-50

If your ratios are too high to qualify, you will need to adjust your purchase price downwards, buy the rate down (the sellers might help with this) or find a way to increase your down payment.