How Much House Can You Afford?
Before you begin looking for For Sale signs on houses, do your homework to know what you can afford to spend on a home.
Review your budget and determine how much you want to pay each month. Lenders will consider the home's sale price and your downpayment in determining how much to loan you, but you need to determine how much you feel comfortable paying each month.
In addition, remember that housing costs are usually more than just mortgage principal and interest; they often include property taxes and insurance.
As a general rule, your monthly housing cost should not exceed 28 percent of your gross monthly income. If you have other long-term debt (car payments or credit card balances), that monthly debt plus your house payment shouldn't be more than 36 percent of your monthly gross income.
Since many lenders offer mortgage preapprovals, you might want to meet with a lender early in the home-buying process, so that you know what size loan you qualify for.