When you are looking for a home you might just start looking or you might be like a lot of folks and have one of the many "wrong" ways to figure this out.

For many folks, they grew up thinking that the amount they qualify for is related to some number multiplied by their annual income.  For others, it might be credit score based.  The real way to determine this number is to come up with a budget.

Turns out that determining how much to spend on a home comes down to good ole' business practice of a profit and loss statement or in the mortgage world, debt to income.  Once you know how much "profit" you have you can determine your budget.

Basically you want to figure out how much you want to spend.  Unlike buying a car, basing your decision on the monthly payment is nearly the perfect way to buy a home.  It's also the first thing you may want to do.  If you were looking in many markets, like the Atlanta Real Estate market, you'll have to be quick to put your offer in sometimes the day the home is listed.   So knowing exactly what you can afford is crucial.