The previous answerer is right, they are talking about a percentage of Gross Income. Unfortunately, for many home buyers their tax situation is a lot different so sometimes using gross pay can be a problem. Keep in mind that there are 2 ratios a mortgage lender looks at. They are the mortgage percent including taxes, homeowner's insurance, homeowner's association dues and any mortgage insurance and secondly total monthly debts including the mortgage and all other debt is included. While you obviously need to be concerned about the lender's ratios in order to qualify for the mortgage, you should not extend yourself beyond what you personally are comfortable in handling particularly if your income varies throughout the calender year.

Sincerely,

Sell My Note Guy