To find out how much of a payment you qualify for, take your income in an annual format and divide by 12 to get your monthly income. Then multiply your monthly income by 50% and subtract out any monthly liabilities. The amount you have remaining is what you can qualify for in terms of a new monthly payment.

Consider this example to help you understand this concept:

Bob makes $12,000.00 per year. Therefore, his monthly income is $1,000.00 per month. Bob has a car loan that he pays $100.00 per month for. He also has two credit cards. One has a minimum payment of $20.00 and the other has a minimum payment of $30.00.  Bob is currently renting but wants to buy a new home. He wants to find out what monthly payment he can qualify for. To do this, you would take the $1,000.00 per month and multiply by 50%. That gives us $500.00. Then, he needs to subtract his current monthly obligations from this $500.00. That would leave him with $350.00. This $350 is what you would have to qualify for a new monthly payment. On the home you want to buy, your monthly principal and interest, monthly taxes and HOA dues (if applicable) must fit within $350.00. As you can see, Bob most likely would not be able to fit all the payments in the new home within $350.00. Bob will most likely not qualify for a home at this point in time.