You often hear people refer to their homes as investments. That's only half the truth. The primary purpose of a home is to shelter you. Yes, a house can be an investment, but the stock market demonstrates greater long-term returns.

Homeownership feels satisfying, and you get a tax break on the mortgage. But ownership is not all wine and roses. When the roof or water heater leaks, you have to shell out money for repairs. A renter who loses a job can move out and find a cheaper place; selling a home on short notice is a costlier and more complicated process.

There are options between renting and owning: seller financing, lease with option to buy, and contract for a deed. But regular homeownership is the most common option. The first thing to figure out is how much house you can afford. For most buyers, that's another way of saying that you've got to figure out how much you can afford to borrow.

In general, mortgage lenders want your monthly housing payment to be 28 percent or less of your monthly before-tax income. For this calculation, your monthly housing payment includes the principal and interest on the mortgage, plus property taxes, mortgage insurance and hazard insurance. Lenders call this your housing expense ratio or front-end ratio.