One of the most important things to figure out when you are buying a home is your budget. Before you ever start looking at houses you need to determine three things.

1.  What you are ALLOWED to spend. That means how much mortgage you can qualify for, plus any funds you have available for a down payment. I highly recommend seeing a professional mortgage broker. They will help you determine what you can qualify for based on your income, debts, credit score, and current mortgage qualification rules.  They will also help to find you the best interest rate and terms for your needs.
2. What you COULD spend. That means calculating what payment can fit comfortably into your budget, keeping in mind costs like property tax, home maintenance, and closing costs. Not to mention things like furniture, window coverings, etc. While they aren’t technically considered part of your housing cost, anyone who’s ever bought a new home knows once you move in there will be things you want or need to buy in order to make your house feel like home. This is the step that helps you avoid becoming “house poor”.
3. What you WANT to spend. This is a question of lifestyle. Maybe you love to travel, so you will decide to spend much less than you qualify for and could easily afford, to save money for travel. Or maybe having a certain type of home is very important to you, so you will decide to spend more, knowing it may mean less free cash for other things.

Once you’ve determined the answer to these three questions, you’ve determined your maximum budget. That doesn’t mean you must spend to the maximum, if we can find something that meets all of your wants and needs below budget, all the better! However, knowing your maximum budget before shopping is the best way to avoid disappointment.