Think of the last time you confidently faced a difficult task.

Did you look to someone else to tell you exactly what to do, or did you rely on yourself?

These days, seeking a mortgage ranks as one of life’s formidable tasks. “A lot of different factors have to be aligned right – the value of the house, your credit score, your income, savings and down payment,” observes Cate Williams, vice president for financial literacy for Houston-based Money Management International.

So, if you are able to pass muster with a scrutinizing lender, that means you should borrow whatever amount you’re approved for, right?

No, warn the experts. As with other tough tasks, it’s best to think it through yourself.
Indeed, the amount some are approved to borrow can be “too high for their financial circumstances,” warns Michael Dubis, a financial planner in Madison, Wis.

Many borrowers don’t think through the mortgage decision simply because they don’t know what factors to consider, says Barry Zigas, director of housing policy for the Consumer Federation of America, a Washington, D.C., nonprofit.

Here are some “thinking” points to ponder so that you’ll be able to borrow with confidence:

What do you spend on?

A lender will examine your monthly debt obligations, like your car payments and credit card bills, and peg that amount against your pre-tax monthly income.

Depending on the strength of your financial profile, a lender may allow you to assume a mortgage payment that, along with other regular debt obligations, like your car payment, totals one-third or more of your monthly gross pay. “The further out the [debt-to-income ratio], the more you need positive compensating factors, like cash reserves,” explains Tom Hedderich of The Mortgage Network Inc., Indianapolis.

It’s a sensible analysis, but lenders apply the same examination to all borrowers. Your unique expenditures, like daycare costs, wouldn’t be weighed in monthly obligations by the lending firm, but you should consider how this will impact your ability to budget for a new mortgage, advises Williams.

How does your current payment feel?

“A [loan] originator should ask, ‘What are you currently paying for housing, and what payment do you think you’d be comfortable with?’” explains Jeri Lynn Fox, president of the Illinois Association of Mortgage Professionals.

If you’re feeling pinched with your current payment, don’t expect to manage a bigger mortgage, warns Williams. Try to “practice” for a larger bill by saving more for a few months, she suggests.

In some cases, homebuyers try to “stretch” in the initial years of owning, so that they can buy a relatively expensive home that they will be happier with or be able to stay in longer.

Counting on your income to rise in future years is risky, however. Asks Williams: “In this recession, are there really any professions that guarantee income rises?”
Although stretching may work for some buyers, concedes Williams, most people do better with some breathing room.

What will your new expenses look like?

Your housing payment will include property taxes and a homeowner’s insurance premium – something borrowers who fiddle with online calculators showing only the principal and interest charges for certain loan amounts – often forget about, but that can add up to hundreds annually, notes Williams.

Maintenance will also add to your housing expense, particularly if you purchase a home that has been somewhat neglected by its former owner, Fox warns.
Lenders will like to see three to five months worth of mortgage payments sitting in an emergency fund, so that you’re equipped to handle bills for surprises like a broken furnace, says Hedderich.

Housing emergencies are just one of many of life’s curveballs that can prove costly, says Williams. That’s why she likes “living under your means ... So that you have options when things happen.”