Your lender decides what you can borrow but you decide what you can afford.

Lenders are careful, but they make qualification decisions based on averages and formulas. They won't understand the nuances of your lifestyle and spending patterns quite as well as you do. So, leave a little room for the unexpected; for all the new opportunities your home will give you to spend money, from furnishings, to landscaping, to repairs.

Historically, lenders apply formulas to determine how much a buyer can afford. The Gross Debt Service ratio, or GDSR, is not to exceed 32 percent of the buyer's gross monthly income for a housing payment , and the Total Debt Service ratio, or TDSR, is not to exceed 40 percent of the buyer's total debt load, including car payments, student loans, and credit card payments. No matter how expensive your market though, we urge you to think carefully before stretching your budget.

Deciding how much you can afford should involve some careful attention to how your financial profile will change in the upcoming years. In the long run, your own peace of mind and security will matter most.