The path to homeownership is exciting and rewarding, but it can be stressful when finances are involved. Here are four steps to help you decide how much house you can afford.

Step 1: Understand your financing

If looking at your finances makes you nervous, it’s best to start slow. Set some time aside that you won’t be interrupted and make a finance date with yourself. You can cook/order your favorite meal and play some calming music. Once you are ready, look at all your finances. Create a spreadsheet or an itemized list of all your debts and income. Take some time to fully understand your financial picture.

Step 2: Calculate your DPI

After you’ve calculated your debt, it’s time to determine your debt-to-income ratio. There are two types of DTI: front end and back end. Front end uses only your housing payment and back-end DTI adds your current debts to your proposed mortgage payment. For front end DPI, lenders want you to spend less than 36% of your income on principal, interest, property taxes and insurance. For back-end DTI, lenders want it to be less than 41% to 50%. If your DPI is not where you’d like it to be, then determine your next steps on how to pay down debt.

Step 3: Get your credit score

Get a copy of your credit report and find out your credit score. If your score is low, find ways to increase your credit score. A better credit score will help you get a better interest rate. If your score is low, work with your lender to determine the best way to increase your score. The Commission does not have a credit score requirement for its downpayment assistance programs.

Step 4: Determine your downpayment

Contrary to popular belief, you do not need a 20% down payment. In fact, according to a study by the National Association of Realtors, the median downpayment is 7%. Some conventional loan programs will accept 3%, FHA loans 3.5%, and VA/USDA Loans 0%. If you need assistance with your downpayment, and you qualify, one of the Washington State Housing Finance Commission’s Down Payment Assistance programs could help you.

Step 5: Take a homebuyer class

The Washington State Housing Finance Commission’s homebuyer class can help you learn how to purchase and maintain a home. They are free and open to the public and include information about the Commission’s first mortgage programs, downpayment assistance, and other loan programs; and are accepted by all affordable housing loan programs as meeting or exceeding educational requirements.

Step 6: Buy what you can afford

Use a mortgage calculator to start estimating what your mortgage payment would be on various house prices. You may need to set your sights on a smaller home or a different area than you had originally planned. You can decide to continue saving or purchasing a “starter” home that will help you build equity in your home. The equity you build can be the future downpayment on another home.