Consumer Reports: How much mortgage can you afford?

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You fell in love with a house and your bank approved the loan, but before you sign, Consumer Reports says make sure your eyes aren't bigger than your bank account. (WLS)

You fell in love with a house at first sight, and your bank approved the loan but before you sign on the dotted line, Consumer Reports says make sure your eyes aren't bigger than your bank account.

Chiara Norbitz and her husband Mike Grubiak just bought their first home.

When trying to determine their price range, they had two goals: keep their monthly housing costs below what they'd been paying for rent, and make sure they had enough left over to cover all their other expenses and then some.

"We tried to break it into a pie where we were at least saving a certain amount of money every month," said Norbitz.

Their bank pre-approved them for a certain number, but Consumer Reports Lauren Lyons Cole says that number can be deceiving. Lenders look at how much they think you can pay them each month.

"But that doesn't mean you can make those payments and still save for retirement, still save for college and still manage to go on a vacation every year," Cole said.

Deciding how much mortgage you can afford is personal but Consumer Reports' experts say a good rule of thumb is to cap your housing costs at 25 percent of your take home pay. This should afford you a little wiggle room to keep up with anything that breaks down.

"You need to have money in case the air conditioner breaks or you need to replace the roof. Owning a home is very cost intensive so keeping your mortgage payments as low as possible will help you afford everything else that goes with it," Cole said.

In the end, Grubiak and his wife found a home they love for less than the bank was willing to loan them, leaving them enough room in their budget to start saving for the next big thing.

"We really want to have a nest egg right now for vacations, emergencies and eventually down the road you know having our first child," Grubiak said.

Having trouble calculating a number you can live with? Consumer Reports says working with a financial planner or a third party you trust could be a good move.

Important advice, because according to a recent a recent Bankrate report, 80 percent of current homeowners say their current mortgage payments make it difficult for them to save money and parents in particular have a hard time juggling their competing financial priorities.

All Consumer Reports material Copyright 2017 Consumer Reports, Inc. ALL RIGHTS RESERVED. Consumer Reports is a not-for-profit organization which accepts no advertising. It has no commercial relationship with any advertiser or sponsor on this site. For more information visit

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