7% Rule: Minimize Consumer Debts to Qualify for a Bigger House

Last updated: May 2019

To maximize the amount of mortgage you can qualify for, simply keep your monthly debt obligations (loans for vehicles, student, credit lines, credit cards, etc.) at 7% or less of your gross household income. For example, if your household income is $5000/mo, then your total monthly payments should not exceed $350/mo. If you have to have that big vehicle payment, for example, just understand that it will definitely erode the size of mortgage you will be able to qualify for.

The rule is devised from the differences between the debt-to-income mortgage qualifying ratios for total debt (42% of household income) vs.permitted mortgage/house debt (35%). For more information on debt-to-income ratios, explore further here.

Any other questions, please contact me or check out this page, Can You Get a Mortgage?

Topics: Tips, Debt Management