The answer involves a lot more than the down payment.
February 10, 2003: 2:34 PM EST
By Jeanne Sahadi, CNN/Money Staff Writer
NEW YORK (CNN/Money) - The house is perfect: it feels right, it's in the right neighborhood, and it's got those star-gazing skylights you've always dreamed about. You must have it.
The only question is whether you can afford it.
The answer has to do with far more than the down payment and how big a mortgage you're told you can get. In fact, just because a lender tells you that you can borrow a bazillion dollars doesn't mean you should.
That's because buying a home is probably not your only financial goal. You still have to fund your retirement and you may want to help pay for your kids' educations, not to mention take a vacation or two. Committing every last dollar to the roof over your
head can make for financial frustration at best, disaster at worst.
Here's a quick guide to help you assess how much home you can really afford without committing yourself to the poorhouse.
Step 1: Make friends with reality
Before running off to see every cute colonial on the market, get estimates from lenders of how much you can borrow and then get a loan preapproval. "Why not couch the entire process in reality?" said Barbara Steinmetz, a certified financial planner and former real estate broker. Otherwise, you'll waste time falling in love with houses out of your league, which can be "frustrating and demoralizing emotionally," she said.
There are no absolutes that mortgage lenders apply in assessing a potential borrower's eligibility, but there are some general guidelines that can help you figure out whether you're a candidate for some of the best loans. (For a ballpark estimate, try our Mortgage Qualifier .)