It is important to know how much you can afford before you begin looking at homes. You should also get pre-approved for a loan. This puts you in a stronger negotiating position with a seller.

As a rule, your monthly housing costs should not be more than 28% of your monthly pre-tax income, including the mortgage payment, real estate taxes and insurance. If you have long-term debts, such as student loans or car payments, your monthly payments - including your housing costs - should be less than 36% of your pre-tax monthly income. Some loans, such as VA and FHA loans, are more flexible with these basic guidelines.

Depending on which type of mortgage you select, you can consider houses in various price ranges. An adjustable-rate mortgage will usually enable you to qualify for a higher loan amount. Your agent can help you make the basic calculations. Something else to consider is that buying at the top end of your price range gives you more time to outgrow your home, and can save you money in the long run.