After you’ve looked at estimates for your monthly house payment, then think about all your other monthly debts and expenses. Monthly gross income is your earnings for the year before taxes and deductions are taken out. Debts are recurring expenses you pay off monthly like a car payment, credit card or college loans. Owing a home often comes with bigger utility bills for electricity, heating and cooling, water, internet, and more. Ask the real estate agent or the seller if they have an estimate of the monthly utility costs of the home. Owing a home also comes with expected and unexpected repairs. Having an emergency fund with cash ready for surprises is a good idea. It’s a good idea to start saving for retirement as early as you can. If you have kids, you may want to include child-care expenses or saving for their college educations too in your budget. Part of your monthly gross income probably goes to paying income taxes. Review your spending habits including cell phone and TV/Internet services, entertainment, eating out, clothing and food to get a better picture of how much you spend each month. You want to make sure you build in these expenses to have an accurate amount you can work with for a monthly house payment. Buying the most expensive home you can afford often means you have to cut back in other areas of your life. A good way to look at the big picture of your monthly spending is to calculate your debt-to-income ratio, which you get by dividing your total monthly debt payments by your gross monthly income. Generally, lenders prefer a debt-to-income ratio below 36%. This means you are only spending 36% of your monthly gross income on all your debt payments including your house payment. This leaves 64% of your monthly gross income for all your other expenses, which is a reasonable rule of thumb for many people. Many lenders require that you have a debt-to-income ratio no higher than 36%, which means this is an important number to know when you are trying to get approved for a mortgage.