Before you go out shopping for the house of your dreams you'll need to know what price range you should be looking at. The closer you can get to the mark of how much house you can afford the easier it will be to track down the right home quickly. A better question to ask, however, would probably be "How much house can you comfortably afford?"
One of the mistakes that many people make is applying for a mortgage right away before taking a look at how much they can comfortably spend on the mortgage payment every month. Once the bank pre-approves the mortgage for a certain amount, it can be assumed that this is how much you'll be able to be able to pay every month on your mortgage. It is the amount that the bank has decided for you but it doesn't necessarily mean that you should base any decisions on this amount at all.
Everybody has their own situations, financial budgets and goals to work with and there is no way that this can all be put into a nice neat package when you are applying for a mortgage. The loan officer is going to be looking at your debt ratio and your income in order to figure out how much of a mortgage the bank will feel comfortable giving you. Sometimes, this amount can be a lot higher than what you can actually afford to pay when all things are taken into account.
If you have three children, for example, that are all heavily into sports, you know how much money this can cost. A large chunk of your budget may be put towards supporting their sporting activities and if you pay a high mortgage their sporting efforts would be affected.
A good place to get started is by using a mortgage calculator that you can find on this site so that you can input numbers that are truly reflective of your own financial situation into it. This will give you a better idea of what you can afford so that you can keep your life balanced while looking for a home that will suit your family's lifestyle.
When you're purchasing a home it's never a good idea to overstretch your limits. It can be hard moving into a new place, getting to know the community and the neighbors around and struggling to get unpacked while you continue on with your day-to-day life. The last thing you’ll want to have on your shoulders is a monthly mortgage payment that disrupts your lifestyle to a degree that you cannot experience easily. You're much better off settling for a smaller place while keeping your eyes on building up enough equity to afford a larger home in the coming years.
How much house can you afford? When it all comes down to it it's going to be you and possibly your significant other that is going to have to determine the final amount. Don't let a bank or any other type of lending institution influence your decision because you're the one who's going to have to pay these monthly payments down the road. It is ultimately your responsibility to make the right choice now as to how much you can comfortably afford.