Mortgage companies use different formulas or "qualifying ratios" to determine the loan amount for which a buyer can qualify. These ratios vary among the different lenders and types of loans, but you must meet both ends of the ratio to qualify for the loan.

Some of the most popular formulas are "28/36" and "33/38". The first number refers to the percentage of your monthly income that could go toward monthly payments, 33% in the case of "33/38". If you earn $1,000 per month, for example, you would qualify for a mortgage package with payments of $330 per month. The figures may be for gross or net income, depending on the lender's rules. Insurance and other housing costs may be included in the payment calculation.

The "38" part of the ratio refers to the percentage of your monthly income that will be needed to make the minimum payments on all of your debts like credit cards, car payments, including the mortgage payment. On your earnings of $1,000 per month, you should spend no more than $380 of your total earnings on your monthly debt payments (including your mortgage payment).

For a free consultation to discuss which type of mortgage loan will work best for you, call Victoria Spannaus at Wachovia Mortgage Corp. at (800) 741-7813 or 910-692-6225.