To arrive at an affordable home price, we apply the guidelines used by most lenders. We use a debt-to-income ratio of no more than 36%. We also assume a housing payment-to-income ratio of 28% for a conservative estimate, and 33% for an aggressive one. Before buying, however, you should factor in other savings needs, including retirement and college.
We also assume a 30-year mortgage term, annual property tax of $3,500 and homeowners insurance of $800. Adjust as needed. We do not factor in private mortgage insurance, which you'll owe if your down payment is less than 20% of the purchase price (averages $50 to $80 per month).