Determining how much you can afford in a house payment plays a large role in all the decisions that go to selecting your future home. Your payment can affect everything from neighborhoods where you look, to the size of the house, or even the type of financing you choose.
Your DEBIT-TO-INCOME ratio is one key in determining what payment you can afford in a lender's eyes. As a general rule your monthly debts (car payment, credit cards, school loan), any reoccurring debit with more than 3 months left to pay is totaled as one amount. That amount should not exceed 36% of your gross monthly income. There are some FHA loans that allow a slightly higher % of debit.
Usually banks want your mortgage payment to total no more than 28% of your gross monthly income. Sometimes that rule can be stretched if you are making a large down payment. With a 20% down payment some lenders will qualify a borrower up to a 33% Housing Expense Ratio. Ratios higher than these will make it difficult to obtain a loan.
You can have your lender or real estate agent help prequalify you for a loan. Prequalification is just an estimate of what payment you will be able to afford. Preapproval is a full formal process where the lender examines your finances and agrees in advance to loan you money up to a specified amount.