Step 1

Get Pre-Approved. The only way to truly know how much home you can afford is to ask a lender. Getting pre-approved lets you know how much you can afford before shopping for your home.

What to Know:

• Income: Stable income assures a lender you can make your monthly mortgage payment.

• Debt: Add up auto payments, credit card payments, student loans, alimony, child support, and other debt.

• Cash: Total assets, amount in checking and savings accounts, and other investments.

Step 2:

Determine Monthly Mortgage Payment Including Escrow. Escrow is a third party account used to retain funds including the property owner's real estate taxes and hazard insurance premiums. Escrow is only applicable in certain loan programs.

Step 3:

Understand Bills Associated with Homeownership. Estimate that it will cost about one percent of the purchase price per year to maintain your home. For a $200,000 home, you should budget approximately $2,000 per year or approximately $170 per month for maintenance. Condominiums and co-ops will have regular maintenance fees. You will also have utilities, gas, electric, water, sewage, cable, telephone, insurance, property tax, etc.

Step 4:

Establish Future Priorities and Plan for the Unexpected.

What are your needs for the new home – furniture, lawn equipment, barbecue grill? Do you plan on a new car in your near future? Do you plan to have children? How long can you survive if you lost your job?