How much home does my budget allow? That’s the most important question to ask when you start the process of buying a house. While you might have certain amenities, location, square footage and aesthetics in mind — the most important factor is price.

If your mortgage payment is too high, you’ll limit your ability to buy the things you need, pay for emergency expenses and save money. Not to mention, you won’t have money to invest in things you enjoy, like traveling, entertainment and hobbies. That’s why figuring out how much house you can really afford is so important.

While there’s no single mortgage rule of thumb that tells you how much house payment is right for you, there are several factors that can guide you toward making the best decision. We’ve put together some tips for getting it right. And, if you’re still not sure about how much mortgage you can afford, our mortgage calculator can help.

How Much House Can You Afford?

Some experts say the mortgage rule of thumb is that your mortgage and related housing expenses shouldn’t exceed 28% of your gross monthly income. However, buying a home is a big financial commitment — possibly the biggest financial commitment you’ll make. It’s important to make sure that the mortgage you take on is suited to your personal financial goals and your current financial situation.

The best way to determine how much mortgage you can afford is to create and manage a budget that accounts for your ongoing expenses, debts and savings. When you have a good handle on how much money comes in, how much money goes out and where the rest of your money goes, you can easily identify how much income you can put toward your mortgage. You can also flag areas in your budget where you can reasonably cut expenses if you decide to allocate more funds to your mortgage payment. (Think: eating out twice a week instead of four times a week.) Likewise, your debt-to-income ratio will be an important factor to pay attention to.

It’s also helpful to seek advice from professionals who can guide you as you make decisions that will help you achieve long-term financial success and security. But be careful — not every mortgage expert is the right expert to help you decide how much home you can afford. Your mortgage lender, for example, will help you figure out how much home loan you qualify for based on your income, credit history and other information. Your mortgage lender won’t help you determine how much home you can afford. Too often, home buyers buy a home based on the amount of loan they qualify for, not the amount they can reasonably afford based on their lifestyle and financial goals, leaving them with a mortgage that’s too high.

Additional Costs of Homeownership

Keep in mind that your mortgage payment will include more than just the principal and interest on your loan. One unexpected cost of buying a home is private mortgage insurance (PMI), which you’ll be required to pay if you aren’t able to make a down payment of at least 20%. And depending on where and what type of home you buy, you may be required to pay homeowners association (HOA) fees.

Also included in your mortgage payment are your property tax fees. If you’re buying into a booming community or purchasing a fixer-upper (watch out for these money pit red flags, by the way), your property taxes may go up. Check to see when your area will have its next property tax assessment, and find out what to expect.

Here to Help

Contact a Farm Bureau insurance agent for a quote and to determine which home and property insurance coverage is the best fit for your needs.

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