[safari]

Debt is one of the factors that lenders look at. Like the previous poster said, they also consider your assets (net worth) and salary. I read somewhere that in order to qualify for a loan, the projected monthly payment must be less than 38% of your gross monthly income. Also, all your monthly debt payments together with the mortgage payment should not exceed 45% of your gross income. So it's harder to qualify for a 30 year fixed loan than for a 1/3/5 year ARM because usually the longer the fixed term is, the higher the interest is. If you can barely qualify for 1 year fixed loan, it's probably not a good idea to buy a house because if the interest rate starts rising after the first year, you won't be able to make your mortgage payment. My neighbour who bought a house just 1.5 years ago, is now desperately trying to sell it because he can no longer afford it.

If someone wants to get a mortage, there is always a way. When applying for a loan, they can choose to go with "stated income" instead of "full documentation." This means that they don't need to submit any proof of their assets and income. In this case the interest rate will usually be higher. I know people who did that to get a loan, which they were not able to qualify for, using the "full documentation" method. However, after you get a loan, the lender can choose to review your loan application and ask you to submit all the proof (similar to IRS audit). So even if you've been paying on time, if you can't prove the income stated in the application, the lender can request you to pay off the loan in full immediately. This could happen several years after the loan was obtained, so there is a big risk associated with the "stated income" method.

Then there are so called "subprime" lenders, who can give a loan to pretty much anybody, regardless of their debt and income. The interest rate is going to be a lot higher though on this kind of a loan. The problem is that if a person cannot qualify for a regular loan because he doesn't have sufficient income, how is he going to make payments on the subprime loan, considering the fact that the payment going to be much higher?

If you don't think you can afford to buy a house, don't do it! Just continue renting and saving money. The house might happen sooner than you think.