Always talk to a loan officer before shopping for a home. This will save you time during the house hunting process. The bank representative will tell you confidentially and without cost how you fair in the marketplace and can give you a letter of pre qualification.

This is critical in a strong housing market such as what we experience in the greater New York area. When you are bidding on a home, the seller wants to know “who said these people qualify for my home?”

If we get multiple bids the person with the qualification letter gets more attention because they have the credibility.

Principal, interest, taxes, insurance (PITI) - these are the four elements that make up the typical monthly mortgage payment - also known as “carrying charges.”

Here’s a do-it-yourself method for determining how much a lender might approve:

1. Calculate your monthly gross income - the amount you make before deductions - add spouses monthly gross income, if any, and then multiply the total monthly gross income by 36% - this is known as the debt ratio.

2. Subtract long term monthly debts (e.g., 12 months and over) such as alimony, car loan payments, child support, personal loans, regular payments toward a credit card balance - then subtract a monthly amount for anticipated taxes and homeowners’ insurance - the result is a ballpark monthly payment of PITI (principal, interest, taxes, insurance) you can afford to pay on a mortgage - this is generally how lenders determine what borrows can afford after a 10% down payment - some lenders vary ratios (e.g., 33% with a 5% down payment; 38% with a 20% down payment) - although lenders use PITI, it is wise to allow for maintenance, utility costs and any homeowners or condominium fees.

3. Often lenders calculate a housing ratio - typically, 28% of monthly gross income (does not include other debts) - and may be expressed as 28/36 - where the first number refers to the maximum mortgage payment you qualify for (e.g., 28% of gross income), and the second number is maximum total debt level (e.g., PITI plus monthly debts should not exceed 36% of gross income).

FYI - range of house you can afford is the combined qualified loan amount plus down payment; also, remember to set aside money for closing fees (e.g., points).