First the good news: The size of the mortgage is proportional to the size of your salary. If you make more money, you can borrow more money. How does this work? The typical loan officer figures a good borrower can afford mortgage payments (principal and interest) of 28% of his salary. Another rule is that when adding real estate tax, homeowner's insurance, and other debt, the borrower can afford 38% of salary for monthly payments.

Let's do an example. You borrow $100,000 with an 8%, 30 year mortgage. You pay principal and interest of $734 per month. You need a salary of at least $31,457 per year ($734x12/0.28) to convince the lender that you can afford this. Is this too steep? Then add the real estate tax and homeowner's insurance, presumably $100 per month. Now you need at least $26,337 per year ($834x12/0.38). Do you need another break? Consider a 30 year mortgage where the first five years have a fixed rate and after that you have a rate that varies every year. Now your interest rate is 7.5%. Your monthly payment is now $699 plus $100, or $799. You need a salary of $25,232 per year ($799x12/0.38). Hopefully, when your loan changes into an adjustable rate mortgage, you will have five annual pay raises and you will laugh at this puny debt.

Now the bad news: The recommendations I gave under It is difficult to save enough money to buy a home make your monthly payments go up. But before you get pessimistic, realize that the $25,000 annual salary in the previous paragraph is a feasible goal. Most professionals in their first job have a higher salary. Those of you with a lower salary should click on The pros and cons of college . Another path is to save in anticipation of buying a home because in a few years you will make more money and qualify for the loan.

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