Your income. This includes all income, from all sources, and then take away any taxes you’ll owe on that income.
Your assets. This includes only highly liquid assets – in other words, money in savings accounts, stocks and bonds, mutual funds, etc.
Your liabilities. This includes both lump-sum-type debts, such as credit card debt, and monthly payments, such as an automobile loan, or alimony payments. Now, you have figured out how much you can afford right now to put down as a down payment, and how much you can afford as a monthly mortgage payment. You have also figured out how much you want to spend on your house. The difference between where you are and where you want to be is what you need to work on.
There are two steps to take to get to where you want to be:
Increase your savings for the down payment. Figure out exactly how much extra you need, how long you have until you actually want to purchase a new house, and simply divide the total you need to save by the number of pay periods you will have between now and then. For example, if you need to save $5,000, and
you want tobuy a new house in a year’s time, then you will need to save just over $200 each pay period.
The second step is to figure out by how much you need to reduce your regularly monthly spending in order to be able to afford a monthly mortgage payment. Start by creating a budget, and categorize your spending into categories such as eating out, entertainment, utilities, etc. Then figure out where you can cut back. Are you
spending a lot on Christmas presents? Consider making some presents. Are you spending a lot on phone calls? Try to call during cheap rate times, or use e-mail more. | 
