The basic formula for repayment ability for home mortgage loan approval is determined by the federal government conforming loan standard. Gennie Mae and Freddie Mac are customary, while FHA and VA loans provide a somewhat more relaxed total debt service limit. The customary formula is:

• Up to 28% of your total income may be dedicated to your mortgage payment.
• Up to 36% of your total income may be dedicated to the repayment of your total debts.

If qualifying for an ability home loan under FHA or VA rules, up to 41% of your income counts toward your ability to pay your debts.

The formula is not absolute: What is the fudge factor in the formula? The answer depends on the definition of income under federal guidelines. In general, salaries and bonuses count as income, while alimony received and matching funds paid by your employer to your 401K do not when applying for a home loan. Also be aware that appreciation on your home, and a home equity line of credit, although producing a ready source of cash, are not considered income but do affect your loan ratio up to the maximum of your line of credit. Additional factors based on repayment ability impact approval and home qualification for loans by all lenders. These factors include items required by government guidelines and practical issues required by lenders.