Buying a home is the largest purchase that most of us will make in our lifetime and is a decision worth some careful consideration. Once you’ve decided it’s the right time for you to purchase a home (i.e., you are financially stable and intend to stay put for at least a few years), the first step to finding a home is considering how much you can afford to spend.

As a starting point, in most cases you should aim for a home that costs between 2x and 5x your current annual gross income – so if you are making $100k a year, you would likely want to consider homes costing somewhere between $200k and $500k.

To get a better sense of what you can afford, you need to consider your other financial obligations. If you have significant debt obligations (e.g., credit card bills, student loans, and car payments, etc.), that will impact what you can afford. You should shoot for having all your monthly payments (including your mortgage, HOA, insurance, etc.) totaling less than 36% of your gross monthly income. So if you have a gross annual income of $100k, or $8,333 a month, and $1,500 in other obligations, your total housing payment should be no more than $2,460 or ($8,333-$1,500) * 36%.

A great way to estimate your total housing payments is with the Chimponomics Mortgage Calculator. For instance, with a 20% downpayment and 4% mortgage, the calculator will show that you could afford a home priced just over $470k. It’s best to save enough to make a 20% downpayment. It is possible to get a mortgage with less than 20% down, but you will have to pay for PMI (Private Mortgage Expenses) which will increase the cost of the mortgage (PMI adds about 0.5% of the total loan amount to your mortgage payments for the year).

Hopefully these guidelines will give a good sense of how much home you can afford. However, it is important to carefully consider your individual situation when considering purchasing a home. For instance, if you feel your employment outlook is relatively unstable or you might be incurring some additional expenses (e.g., may go back to school, etc.), you would want to be more conservative.