Knowing what you can afford depends on how much income and how much debt you have. In general, lenders don't want borrowers to spend more than 28 percent of their gross income per month on a mortgage payment or more than 36 percent on debts.

The price you can afford to pay for a home will depend on six factors:

1. your credit history
2. gross income
3. your outstanding debts
4. the amount of cash you have available for the down payment, closing costs and cash reserves required by the lender
5. the loan program you select
6. current interest rates