Decide how much you can afford for a house before you shop for it, not after. This will save you untold hours looking at houses that you should not really be in the market for to begin with.

It is important to realize what lenders will use to determine what you can afford, such as your total income, how much you are depositing, what the closing costs will be, etc. Total expenses have to be examined by the bank to make sure you will be able to pay down the loan they are giving you.

There are some rule of thumb ratios that many lenders use to take into account your income and expenses, debt ratios and closing costs, to determine what you can afford to pay for a house.

You can do these calculations yourself, or you can enlist the assistance of a mortgage broker to do them for you.

For most people, affording the down payment is the biggest barrier to buying a home. People don?t routinely save as much as they did in the past, so frequently they will not have any sizable balances in savings accounts. We can forget about no down payment mortgages now that the credit crunch in the housing market has forced lenders to be more strict about their terms.

Assume at least a 10% down payment to buy a house. If the house you are looking for is in the range of $200,000, you will need $20,000 for a down payment and additional funds for closing costs. Lenders will be pleased to give you an estimate of the closing costs.

A minimal estimate of closing costs would be $5,000, making a total of $25,000. Now the lender will ask whether you can afford the monthly payments. There are mortgage affordability calculators on the net, or you can ask a mortgage professional to do these calculations for you.

The traditional rule is that your home costs should not be greater than 25% of your income. However, if you have high credit card debt, it will affect this rate. The bank expects you to use the remainsafter the 25% for such items as clothing, utilities, education and savings, not high monthly payments on a card. A high credit card debt means that you will have that much less available for your basic needs.

Barring excessive credit card debt, you can calculate that if you earn $6,000 a month, you can afford a payment of $1,500 for the mortgage, taxes and insurance. This is at least a jump off point for your shopping trip for a new home.