Now is the time to buy a home, there are so many homes on the market at great prices, but you want to make sure that you still purchase a home that won’t leave you overextended.  To make sure that the house you are thinking of buying is going to be affordable, make sure you do your research and budgeting before you sign the paper work.

To get started, figure the amount you've budgeted for your monthly mortgage payment. If you're not sure how much to spend on your mortgage, a great guideline to start with is somewhere between 30% to 40% of your monthly income. This should include principal and interest, as well as property taxes and homeowners insurance.

 Most people can afford a home that costs up to three times their annual household income, if they can make a 20% down payment and have only a moderate amount of other debt. If you have little to no debt and can put 20% down you can probably buy a house worth up to four times your annual income. Calculate how much house you can afford with this home affordability calculator to see an estimate of how much you can potentially afford for your new home.

When it comes to deciding how much you can afford to spend consider the following:

  •  Make sure you get pre-qualified or pre-approved for your loan before you start looking.
  •  If you buy a condo or a home that requires you to join the homeowner's association, your monthly dues will directly reduce how much you can afford to spend on a home. Some dues can be very costly, be sure to include the cost into your budgeting.
  •  Remember to assess and figure in the costs for any remodeling and repair projects.

If you're considering a new home purchase, it is crucial that you spend time calculating what you can truly afford. Remember, just because the bank says they will give you a certain amount of money, that doesn't mean you can actually afford it. Everyone's situation is different, and by planning ahead to ensure you're not overextending yourself, you can make it through the difficult times