When you’re shopping for a brand-new home, it seems like the sky is the limit. New homes seem to have almost unlimited configurations, and there are many upgrades you can make to have the home look just the way you want. Of course, the more upgrades you choose, the higher the price of the home. The cost can quickly add up.

If you want to avoid struggling to make payments, you’ll need to set a strict budget for your home. This will allow you to stay focused on the things that matter most to your family.

Look at Your Current Finances

It’s smart to take a look at your current finances to help you make a decision about what will be affordable for your family. What are you currently paying for rent, and is that affordable for you? In addition to your current housing expenses, are you stocking away a lot of savings?

For instance, let’s say that you’re currently renting a home for $1,500 a month. If you have a balanced budget at that rate, then it’s fairly safe to say that a mortgage around $1,500 a month could work for you. If you’ve been saving an extra $1,500 each month toward a down payment on your new home, though, you could probably comfortably afford a mortgage that’s between $2,000-2,500 a month.

However, if that $1,500 is a bit of a stretch, allowing you to only make minimum payments on your credit card debts, then you probably want to look for something a bit lower or wait until you’re in a better position to buy a home.

Don’t forget that some of your other budget expenses might go up when you own your home. For instance, things like utilities, and property taxes might be included in your rent. You’ll have to pay these expenses on your own as a homeowner.

Be Smart About Debt

It’s smart to get a pre-approval from the bank. During this process, they’ll tell you just how much they think you can pay each month. Their estimation uses a standard formula based on your income, your credit score, and the minimum payment on your debts. However, it doesn’t take a lot of other expenses into consideration.

If you’re trying to pay off debts by making more than the minimum payments, paying private school tuition for the kids, or spending a good chunk of money on something else, you probably will want to set your budget lower than the maximum amount allowed by the bank. Be smart about how much you borrow.

Understand the Monthly Mortgage Payment

Mortgage payments can be confusing. When some people — usually lenders — talk about the mortgage payment, they mean the amount that you pay to the bank to go toward the mortgage. However, the actual amount that you pay each month will likely include a twelfth of your annual homeowners’ insurance premium and a twelfth of your annual property taxes.

The bank collects these for you, puts them in a special account, then handles making the payments for you. In most cases, these two fees — and possibly some additional ones — add up to a few extra hundred a month. If you purchase a home based on an affordable mortgage payment, and you’re only thinking about the money going toward the bank, you may find yourself in trouble.

Play Around with a Loan Calculator

When you have pre-approval from the bank, you’ll know what interest rate you’ll be paying. Put some details into an online loan calculator. Look for ones that will include things like homeowners insurance, title insurance, and property taxes for the most accurate results. It’s in doing this that you’ll notice how subtle changes like a higher down payment or a location with lower property taxes can make a big difference. It can help you make smarter choices when purchasing your home.

Once you’ve done this, check out the tool at Nerd Wallet, which can show how monthly prices can translate into an overall loan amount. This will be your target budget.

Staying within your budget is the best way to be happy with your home purchase. At Sterling, it’s not hard to find a home that fits your budget because we offer a variety of home styles. Come check out the quality of our work, and speak with an Area Manager to find out how you can build the home of your dreams at a price you can afford.

Related article: Homeowners Insurance: What You Need and Why You Need It