That's because there are many up-front costs associated with buying a home. If you sell your home again in a year or two, you won't be able to recover those costs. Banks and other lenders have very strict lending rules. The amount you pay for principal and interest can't represent more than 28 percent of your gross take-home pay, or the amount on your paycheck before any taxes or other deductions are taken out. There is a second part to this equation.
Some lenders offer expanded ratios, however.
You must also decide what you can afford to pay as a down payment. You can find lenders who will loan you up to 95 percent or even 97 percent of the price of your home. But, if you borrow more than 80 percent, you'll have to buy private mortgage insurance, or PMI, which is added to the cost of your monthly mortgage payment. HSH also offers a 56-page booklet, How to Shop for a Mortgage , containing charts and tables to help you decide what kind of mortgage suits you best. Now NEA Member Benefits has a program that can help you take the hassle out of home buying.