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... but her $40K income puts her a little short on the $125K mortgage ...

Five years ago I qualified for a $131,000 mortgage, with a $26,000 second taken back by the owner. I was making only $40K and my wife doesn't work. Unless she has a lot of debt this shouldn't be a problem.

Here is how mortgages are figured:

1. Front end ratio - should be less than 28% of Monthly Gross pay
2. Back-end ratio - should be less than 35% of monthly gross plus debt.

Her monthly gross should be about $3,333 which qualifies her easily for the front end on a $125K mortgage, with a monthly payment of about $850. If she has more than about $400 in credit cards and car payments, she could be sunk.

You may want to check on BofA or E-loan's websites for a mortgage calculator.

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