One of the best ways to determine how much you can afford to spend on a home is to look at your monthly income and expenses just like a lender will when you apply for a mortgage.

For a conventional loan, which is one not guaranteed by a government agency, your total:

• Housing costs -- including principal, interest, taxes, assessments or any other fees shouldn't exceed 28% of your gross -- or pre-tax -- income.
• Monthly debt payments including your mortgage, auto loans, utility and credit card bills shouldn't exceed 36% of your pre-tax income.

It's critically important not to underestimate your debts and take on a mortgage payment that's too big. Click here for more help on accurately estimating your debts.

Then let's say you and your spouse make $50,000 a year before taxes.

Your total "debt limit" -- mortgage, car payment, utilities, and such -- would be 36% of that, or $18,000 a year, which equals $1,500 a month. Of that amount, the most your house payment can be is $1,167.

If all your other regular monthly debts total $333 or less you would qualify for a conventional loan. If your regular monthly debts total $500, you would qualify for a mortgage with a regular monthly payment of $1,000, and so on.

With a $75,000 family income, the 36% figure is $2,250 a month and the limit on the mortgage payment is $1,750. At $100,000 salary, it's $3,000 a month with a mortgage limit of $2,333.

As you can see, the 36% total debt limit is usually more important than the 28% figure.

So pinpoint a mortgage payment that is comfortable, and look at homes in that payment range. And remember, these figures apply to the total amount of the loan, not the total cost of the home. The lender is more interested in how much you want to borrow than in how much the house costs.

If you determine that you can make a $1,200-a-month mortgage payment, you have to look at how big a loan that translates into in terms of interest rates, insurance and so on.

Depending upon your circumstances you could end up making a $1,200-a-month payment on a house on which you put $5,000 down, or one with a $50,000 down payment.

Use our 28/36 mortgage calculator to figure out how much you can afford to borrow.

By Stef Donev

Interest.com Contributing Editor

Have a question about your finances? Ask us at editors@interest.com