• You can afford a home that's up to 2 1/2 times your annual gross income.
• Your monthly payments (principal and interest) should be 1/4 of your gross pay, or 1/3 of your take-home pay.

The downpayment and closing costs - how much cash will you need?

Generally speaking, the more money you put down, the lower your mortgage. You can put as little as 3% down, depending on the loan, but you'll have a higher interest rate. Furthermore, anything less than 20% down will require you to pay Private Mortgage Insurance (PMI) which protects the lender if you can't make the payments. Also, expect to pay 3% to 6% of the loan amount in closing costs.