Otherwise, determining how much you can spend on a home loan starts with understanding how to compute the final price of buying a house. Along with the price of house (principal) and the interest, there are also some other components of a mortgage to consider:

• down payment: The more money that you put down, the lower your principal will be, and ultimately, the less you'll pay in interest. A 20-percent down payment is an ideal amount, however, it is not a rule. You can still become a home owner if you want to put more-or less-down on the home.
• term and interest: Mortgage loan terms (or the length of the loan) are typically between 10-30 years long. Usually, the longer the loan, the more you'll pay in interest, although you'll have lower monthly mortgage payments.

• closing costs: These are fees that you (or perhaps even the home seller) pay for various services that are related to the home's sale. There are a variety of potential closing costs. For now, just plan on paying closing costs for approximately six percent of the home's price.
• points: On the other hand, points aren't as predictable as closing costs, although they can have a significant impact on your interest rates. For now, just think of them as a down payment on your interest.

Much like applying for a credit card, the lender or broker will collect information about you and determine how much money you can have to spend, and how much interest you'll pay for the loan.

Next: Do you want to learn about the different types of mortgages, where to find a Realtor(R), or would you like to be matched with up to five mortgage lenders?