Borrowing money to buy a home can be a daunting experience. That's because most first-time home buyers -- and even some experienced home buyers -- do not consider how much they can afford before they borrow. Often times, their dream of owning a bigger home than they can realistically afford clouds their financial judgment. If you're considering purchasing a home but you're not sure how much house you can realistically afford, here are some factors to remember before signing on the dotted line.

Interest Rate

One of the most important variables that factor into a mortgage payment is the interest rate. If you're a home buyer with good credit, you can get a lower interest rate than a buyer with bad credit. Interest rates are also best if you can get a fixed rate instead of an adjustable rate. That way, there are no surprises in a couple years when the interest rates adjust to the current rates.

Property Taxes

Most first-time home buyers forget about property taxes when purchasing a home. Depending on where you live, property taxes could be a huge chunk of your monthly mortgage payment if you decide to add it in. Other buyers decide to pay it separately. This way, you are required to pay it once a year. Unfortunately, this bill can be hundreds or even thousands of dollars. Consider the amount you'll be paying in property taxes before making your final decision on a new home.

Home Insurance

Paying for a homeowner's insurance policy is another expense involved when you purchase a home. If you have less than 20 percent equity in your home, you're required to have PMI, or Private Mortgage Insurance so the lender recoups their money in case you get foreclosed upon or if a disaster happens to the home. A decent policy will cost at least hundreds of dollars each year depending on the cost of your home.

Closing Costs

When you close the deal on a new home, the closing costs can be expensive. If you're an inexperienced home buyer, the closing costs might even be shocking. But they are a necessary expense for any home sale. When buying a home, be sure to have thousands set aside at closing. Your real estate agent can give you a better idea about how much this will be because there are many variables that factor into step in buying a home.

Home Inspections

Before you decide on any home, getting a home inspection is vital. The problem with paying for a home inspection is that you might decide you don't want the home after finding out the inspector's report. That means you could be paying for a couple inspections before deciding on a home you want to buy.

Deciding how much house you can afford isn't easy. There are so many factors that go into buying a house that it's impossible to sit down and calculate an exact amount of money that you'll need to complete the process. The best thing to do is have some money set aside for unexpected expenses so you can still complete the process without going broke.