35-percent rule of thumb

A lender uses this rule to determine a borrower's housing affordability. It says that a borrower can afford no more than 35% of monthly take-home pay. Example: Brian's gross annual income is $50,000 and take-home pay is $2,095 per month. At 35%, Brian could not afford a monthly payment of $1,050. Using this amount, the mortgage term, and a mortgage payment schedule, the lender can calculate how much Brian can qualify for.

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