FHA mortgage loans are taking off according to National Mortgage News Online. Something wonderful for homeowners and home buyers is occurring and you can be part of it.

FHA, the Federal Housing Administration, doesn't make loans directly but it insures its approved lenders against loss. An approved FHA lender is any mortgage originator that has qualified with the Federal Housing Administration and met their standards.

An FHA insured loan insures the lender in case the borrower defaults on his payments. Commonly misunderstood, FHA does not insure the homeowner in the face of job loss, casualty or other difficult times. But it does allow for lenders to offer mortgage products with low down payments that a lending institution might not otherwise offer.

If you are wondering how a lender decides what is the maximum mortgage you are allowed to borrow, it takes into account several factors.

The debt-to-income ratio is the first and foremost issue to determine affordability for the maximum loan amount on an FHA mortgage loan. It is a simple calculation that compares your gross income before taxes to your housing expense. Your housing expense is a combination of your prospective monthly payment of principal, interest, taxes and insurance. FHA wants this ratio to be 31% or less.

Another way to say it, you will make the bank happy if you don't spend more than 31% of your gross income on your house payment.

There is also a second debt-to-income ratio that accounts for your monthly housing expense plus other non-housing expenses such as monthly payments from credit card debt, installment debt, car payments, student loans, alimony, and child support. It is calculated by adding the monthly housing payment (principal, interest, taxes, insurance) plus monthly payments from non-housing expenses to arrive at a total debt. Then simply divide the gross monthly income by the total debt. The Federal Housing Administration considers 43% as the highest acceptable ratio. That means that FHA likes to see monthly housing debt plus non-housing debt be less than 43% of your total gross monthly income.

Other considerations come into play such as cash for down payment. A lot of importance is placed on your ability to save money along with the strength of your credit scores.

It may seem overwhelming when you read everything that goes into determining your maximum loan amount but you shouldn't let that discourage you. In fact, the worst thing you can probably do is try to determine your maximum loan amount on your own.

For both refinances or home purchases, here is the most crucial decision you can make. Instead of trying to calculate your ability to borrow, look for a lender that can trust.

Begin with speaking to acquaintances asking who they used for their last home loan and I don't mean merely the mortgage company. I mean specific people such as loan officers and mortgage brokers. Securing a mortgage broker who you can trust to be your advocate feels very reassuring.

Second, consider people you know in the real estate industry like Realtors who often have the best contacts in lending. Most likely certain names will come up over and over.

Finally, take advantage of the internet to search for lenders in your specific area. For example, you could search for mortgage lenders and then add your city or locality to the search. See who comes up. You might be surprised. The web is where mortgage companies are spending their advertising budget.

I don't have to tell you to choose a representative that you like and can trust. As I often say, it is your mortgage, no one cares about it more than you.