Most people can comfortably repay a loan that is two and a half times their total annual income before deductions. That means if you make $30,000 a year, you could qualify for at least a $75,000 loan. Remember: you still have to save for the down payment, closing costs, and inspection costs, and have good credit.

What You Can Afford to Borrow

Some lenders may qualify you for a loan that is more than 2.5 times your annual income. You might qualify for a very large loan, but that doesn’t mean you can afford to borrow that much money. Take a serious look at your finances and your estimated monthly expenses. If you can comfortably make payments on a large loan, you’re in good shape. If you can’t comfortably make payments and miss mortgage payments, you may lose your home.

Calculate How Much You Can Borrow

Depending on the type of loan you choose, lenders use two primary calculations to determine how much money they will lend you and how much they think you could afford to spend on monthly housing payments. Mortgages with low introductory rates (for example hybrid ARMs, interest-only mortgages, and option ARMs) will cost less in the first few years. Many lenders will give you a larger mortgage based on this low monthly payment. However, you should make sure you know how much the payments will increase after the first few years. A good idea is to ask your lender how big a mortgage you would qualify for at the higher payment level. This will help you make sure you’re not taking on too much debt. See the EverydayMoney Mortgage Tool for help in estimating your future payments.

Housing Expense Ratio

Some lenders will not approve a loan that would require you to pay more than 35-45% of your total monthly income on housing. For example, if you make $40,000, a lender might not approve a loan that requires you to pay more than $1,167 each month (or $14,000 a year). Other lenders, however, may approve a loan that allows you to spend more of your income on housing. It’s up to you to determine whether you can comfortably repay a mortgage that takes up a large percentage of your income.

Debt-to-Income Ratio

How much you owe has a big influence on how much money you can borrow to buy a house. Most lenders want your total debt, including credit cards and car loans, combined with other expenses like child support, alimony, and new home expenses, to be no more than 50% of your gross income and housing expenses. If you make $40,000, your total debt including your new home expense, couldn’t exceed $1,667 each month (or $20,000 a year).

Some lenders will allow higher debt-to-income ratios. But be sure to get a loan that you can pay back, considering all of your debts and monthly expenses.