How much house can we afford?
We made a spreadsheet showing the breakdown of after tax/tithe income based on just my income (in case SAHP happens). Then plugged in everything we spend and anticipate spending, made it about as worst case as possible, and played with the spreadsheet a bunch. What happens if X happens, where X is dramatic income reduction, housing crash, recession, etc.
After looking at our situation we decided we wanted to spend around 20% of that amount (after tax/tithe) on mortgage/property taxes/insurance. We will be about 23% if our current accepted offer goes through.
Your situation will be different since you are a different family with different priorities in a different real estate market with different price ranges.
Figure out what you need and what you want. Then determine what of your wants you are willing to pay for. Part of the reason we bought a bit higher than planned is that we can see ourself in this house for 10+ years and so we're ok paying slightly more now with the expectation that this location will not require us to move for job/family reasons indefinitely.
When thinking about our situation, I thought a fair bit about the 10-10-10 concept - how would I feel after 10 minutes? 10 months? 10 years? This can help sort out your needs from wants and determine what you actually will be willing to pay for. Most wants are
probably wants rather than needs and thinking along 10 years will make it easier to sort them out. All those fancypants bathrooms - do you really care? It might be great after 10 minutes, but after 10 years are you really going to care that your bathroom has super-fancy-feature-you-never-use-X? Probably not.
Also, something to keep in mind, figure out what is potentially a future fix vs impossible. If you decide you hate <random interior feature> you can probably pay $ and change it, if you decide after living in a place you really can't stand it. But you can't just change your lot. Windows are a good example, if your place is great except not enough or poor too small windows you can always pay to add more or upgrade them.
If you are going to be working with a realtor, make sure you pick a good realtor. You have a huge incentive to not have a mediocre realtor. Find someone who you believe will actually help you and guide you through the process.