How do I know how much I should spend to buy a home?

Here are some tips to keep you on track.

Know your financial situation: Prepare a budget before you start house hunting. In general, spend no more than 32% of your gross monthly income on housing. Remember, this includes utilities and property taxes. And your entire debt load shouldn't exceed 40% of your monthly gross income. Debt load includes car loans as well as credit card and line-of-credit payments.

The lowest interest rate isn't always the best solution. Consider your individual situation, talk to two or three lenders, and be sure to read the fine print. Make sure you plan for closing costs.

If you're looking at an adjustable-rate mortgage, consider that interest rates will fluctuate. Put down as much of a downpayment as you can and make sure you can meet the payments if rates change.